Growth of Fixed Capital Investments in the Regional Economy by Increasing Debt Financing
DOI:
https://doi.org/10.17059/ekon.reg.2020-4-23Keywords:
regional economy, regional development, economic growth, investment, fixed capital, financial resources, loan funds, financial stability, credit rating, interest rates, credit volume, non-financial companies, manufacturingAbstract
An increase in fixed capital investments is necessary for accelerating the growth of the Russian regions and the economy as a whole and requires increased financial resources. The paper considers the possibility of increasing financial resources of regional companies by attracting additional debt financing. The proposed methodology determines the potential demand for debt financing, considering the performance requirements ensuring financial stability. The paper analyses how an increase in debt financing influences credit rating of a company as well as the cost of debt financing attraction. Unlike other works, this paper considers the debt capital structure of companies. Additionally, the study proposes a methodology for identifying changes in the coefficient of interest coverage (that affects credit rating of companies) depending on various debt financing structures. The application of the developed methodology allowed determining the potential increase in debt financing, which is necessary for the investment of regional companies. Debt financing can increase by 1.7 times (43.5 trillion roubles) in Russia in general, 1.4 times in the Sverdlovsk region, 2 times in the Tyumen region, and 1.6 times in the Chelyabinsk region. There are no opportunities to increase debt financing in the Kurgan region. A reduction in interest rates on loans to non-financial companies allows expanding debt financing of the Russian economy without lowering the credit rating. The study results can be used to determine the potential demand for debt financing from companies, industries, regions and the economy as a whole. Further research may consider the validity of the policy of high interest rates on loans to non-financial companies for achieving high economic growth.
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