Press Releases


L. Joseph
(202) 473-7711

WASHINGTON, D.C., May 8 -- The International Finance Corporation (IFC) has just released a study entitled Corporate Financial Patterns in Industrializing Economies (IFC Technical Paper 2), which examines why equity issues are relatively more attractive than debt capital for financing corporate growth in developing economies. The study is based on IFC's unique corporate finance data base, which includes balance sheet and profit and loss information for up to one hundred of the largest listed non-financial corporations in each of ten countries (Brazil, India, Jordan, Korea, Malaysia, Mexico, Pakistan, Thailand, Turkey, and Zimbabwe). The study, by Professor Ajit Singh of Cambridge University, finds that corporations in developing countries rely on outside sources of financing and on new issues of shares to fund their growth. Singh compares patterns of corporate finance in industrial and industrializing countries and explains why corporations in developing countries use equity capital so extensively. According t
o the study, governments in industrializing countries have played a major role in the expansion and development of stock markets. One of the reasons why corporations in these countries went so frequently to the stock markets to raise new issues during the 1980's is because the cost of equity capital fell significantly as a result of large rises in share prices. This, together with an increase in the cost of debt capital, made equity issues relatively more attractive for financing corporate growth. This paper presents the second look at this topic in an IFC publication. The first was written in 1992 and was titled Corporate Financial Structures in Developing Countries (IFC Technical Paper 1). IFC is a member of the World Bank Group and is the leading multilateral source of equity and loan financing for private sector projects in developing countries.

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