Essays on Global Capital Flows and Firm Behavior in Emerging Markets

This dissertation studies how global financial conditions transmit to firms in emerging market economies and how the structure of borrowing and policy institutions shapes that transmission. Across two chapters, it develops and documents a constraint based view of international financial spillovers, emphasizing heterogeneity in financing contracts and the interaction between external shocks and domestic policy. Chapter 1 examines how U.S. dollar appreciations affect firm investment when borrowing capacity depends on different forms of pledgeability. Firms that borrow against collateral face tighter credit conditions when the dollar strengthens because the local currency value of their balance sheet weakens, compressing borrowing limits tied to asset values. Firms that borrow against earnings are less exposed to this balance sheet channel, since their debt capacity depends on operating cash flows. Using bond level security data from LSEG SDC Platinum matched to firm financial statements from Worldscope for publicly listed non financial firms in emerging markets, I classify borrowing contracts as collateral based or earnings based. I show that when the dollar appreciates, investment declines among collateral based borrowers but remains stable for earnings based borrowers. Within the earnings based group, the decline in investment is smaller for firms with higher export intensity, consistent with revenue exposure mitigating the contractionary effect of global tightening. I also document shifts in contract composition toward earnings based borrowing during episodes of dollar strength. The aggregate impact of global financial shocks therefore depends on the distribution of constraint types and firm level exposure to foreign demand. Chapter 2 studies how domestic capital controls alter corporate bond issuance and financing composition. Using cross country variation in the tightening and relaxation of capital flow management measures, the chapter shows that policy interventions reshape the debt structure of corporate borrowing. Capital controls affect not only the quantity of external finance but also the contractual form through which firms access funding. These policy induced shifts interact with global dollar conditions to determine firms' exposure to external shocks. Taken together, the two chapters show that international financial transmission operates through contract design and policy mediated financing margins. Global dollar cycles and domestic capital controls jointly shape the composition of borrowing constraints, and through them, the real responses of emerging market firms.