Rising Corporate Debt and Value Relevance of Supply-Side Factors in South Africa

Machokoto, Michael, Areneke, Geofry ORCID: https://orcid.org/0000-0001-6075-2747 and Ibrahim, Boulis (2020) Rising Corporate Debt and Value Relevance of Supply-Side Factors in South Africa. Journal of Business Research, 109. pp. 26-37. ISSN 0148-2963

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Abstract

Motivated by the recent discovery of a significant increase in corporate debt in developed countries, we use a large sample of 775 listed companies to examine the dynamics and determinants of South African corporate debt. We find an 89% increase in the leverage of the average rm, from 11% in 1990 to 21% in 2015. Long-term and short-term debt increased by 103% and 67%, respectively. We find that this increase is pervasive, and cannot be explained entirely by either rm attributes or macroeconomic factors, despite the importance of the latter. Instead, we find supply-side factors to be the main determinants of the upward trend in corporate debt, highlighting their importance to corporate debt policies in emerging economies.