Do Companies in Emerging Economies have sub-optimal capital structures?
Sub-optimal in what sense? The financial environment in most emerging markets is very different from the developed world, and companies in emerging economy react to these environments in rational ways. For example, because there isn’t a developed market for commercial paper in China or a corporate bond market, Chinese companies tend to hoard cash. Conventional wisdom was that this structure was inefficient, but it allowed most large Chinese companies to withstand the economic crisis far better than most American companies that are much more leveraged.
