The Window of Opportunities and Corporate Financing Choices in Asian Developing Countries

Abstract

The paper finds that the debt deficit and window of opportunities significantly affect firms’ financing decisions in developing Asia. Firms tend to increase the probability of issuing pure debt rather than other financing sources if room to the optimal level of debt is still available. While an expansion of country GDP growth and better market performance brings good opportunities for firms to issue equity or a strategy of both debt and equity, a reduction in the cost of debt supports pure debt issuance. Moreover, the paper also provides evidence which indicates that pure debt issuance is dominant compared to other financing choices in Asian developing countries, and this dominance becomes more significant after the financial crisis.