Nistler CoBPA Faculty Research

Celebrate the impact of our research.

Dr. Kwan Yong Lee and Dr. Cullen Goenner paper published in the International Review of Financial Analysis

Please join us in congratulating Dr. Cullen Goenner, Professor in the Department of Economics & Finance, and Dr. Kwan Yong Lee, Associate Professor, in the Department of Economics & Finance for their article published in the October 2022 issue of International Review of Financial Analysis.

Title: The Capital Structure of Domestic and Foreign Denominated Debt: Firm-level Evidence from South Korea

Journal Name: International Review of Financial Analysis (NCoBPA Tier 3 Journal)

URL to the paper:

Abstract: This study uses a two-part model with firm-level fixed effects to examine the decisions of Korean firms to issue domestic and foreign denominated debt (extensive margin), and among those firms using external finance, their level of leverage (intensive margin) in each denomination. We find that less profitable and fast-growing firms adopt a pecking order in their leverage decisions, which is evident in their preference for domestic, relative to foreign denominated debt. Interestingly, this relation is shown to be stronger following the 2007 financial crisis and suggests demand side factors are important to leverage decisions. Our results also indicate the fixed costs of issuing debt are important to debt use along the extensive margin and vary in strength by denomination. The use of foreign debt, with its higher fixed costs, is shown to be largely determined by factors associated with these costs.