THE IMPACT OF DEBT FINANCING ON FIRMS: EVIDENCE FROM ASEAN COUNTRIES

Abstract

This study examines how changes in debt financing affect operating performance, abnormal returns, operating volatility, and stock price crash risk across ASEAN-5 listed firms from 2005 to 2024, and whether analyst coverage moderates these relationships. Results reveal that debt financing primarily imposes financial burden rather than enhancing managerial discipline. Changes in debt are negatively associated with operating performance across all five countries, reduce abnormal returns in Thailand, produce mixed effects on operating volatility across countries and measures, and reduce crash risk only in Malaysia, suggesting that debt monitoring mechanisms operate selectively across the region. Disaggregating debt by maturity reveals that both short-term and long-term debt produce broadly negative performance effects, with short-term debt additionally reflecting increased liquidity risk and long-term debt unexpectedly stabilizing operations in several markets despite lower performance. Analyst coverage does not amplify debt discipline as predicted but instead compounds financial burden in most markets, further deteriorating performance and amplifying crash risk in several countries. Overall, results vary substantially across ASEAN-5 markets, reflecting the considerable institutional diversity of the region, and suggest that debt discipline mechanisms documented in developed markets do not generalize uniformly to Southeast Asian institutional contexts.