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.
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.
Press copies may be ordered by phone at (202) 473-3969 or fax at (202)
676-0365. The general public may obtain copies through the World Bank bookstore
at (202) 473-2941.