The Theoretical Foundations and Problematic Areas of the Contemporary Long-Term Financing Theory

The imperative of achieving a growth rate for the Russian economy that meets or exceeds the global average-grounded in the pressing issue of resource availability, particularly financial resources-stimulates significant academic interest in a thorough examination of this challenge. Given that financial resources are essential for addressing structural issues, including the establishment of advanced technological production and investments in infrastructure and human capital, these resources must be of a long-term nature; hence, the term “long-term finance” is frequently used in the literature.

The purpose of this study is to elucidate the concept of long-term finance, identify the key areas of inquiry associated with it, and delineate the theoretical frameworks necessary for examining its various dimensions.

The primary methods employed in this study include a content analysis of pertinent academic literature and a critical examination of case studies pertaining to the formation and utilization of long-term financial resources across various countries.

Results: This study has led to the development of analytical approaches to long-term finance, emphasizing their supply, demand, and the mechanisms that facilitate the alignment of these two dimensions. Specifically, the analysis of the supply of long-term finance includes a critical examination of the concept of global savings glut. The measures that resulted in the freezing of Russian reserve assets undermine one of the primary drivers behind the migration of capital flows towards “safe haven” destinations, potentially affecting the incentives for various entities to accumulate substantial savings. In the analysis of the demand for long-term finance, it is demonstrated that the maturity structure of debt held by firms and governments is determined through a trade-off between the costs and the rollover risks. In the examination of the interaction between the demand on and supply of long-term finance, the critical importance of maintaining the functionality of mechanisms that facilitate the transformation of maturities is underscored. The study identifies five vehicles essential for the effective functioning of long-term finance. Furthermore, it demonstrates that regulatory errors can compromise these vehicles, hindering their capacity to supply the economy with necessary long­term financial resources.

1. Abramova M.A., Avis O.U., Akimenko S.V., et al. Modern money theory. Vol. 1. Research at the endoteric level. Moscow: RuScience; 2020. 216 p. (In Russ.).

2. Bessonova E., Denisova I., Ivanova N., Moskaleva A. Demography and savings: A study based on Russian household survey data. Seriya dokladov ob ekonomicheskikh issledovaniyakh. 2024;(135). URL: https://www.cbr.ru/StaticHtml/File/166307/wp_135.pdf (accessed on 20.01.2025). (In Russ.).

3. Bernanke B. The global saving glut and the U.S. current account deficit. The Federal Reserve Board. Mar. 10, 2005. URL: https://www.federalreserve.gov/boarddocs/speeches/2005/200503102/ (дата обращения: 20.01.2025).

4. Summers L.H. U.S. economic prospects: Secular stagnation, hysteresis, and the zero lower bound. Business Economics. 2014;49(2):65–73. DOI: 10.1057/be.2014.13

5. Mayer T., Schnabl G. Reasons for the demise of interest: Savings glut and secular stagnation or central bank policy? The Quarterly Journal of Austrian Economics. 2021;24(1):3–40. DOI: 10.35297/qjae.010085

6. Mian A.R., Straub L., Sufi A. The saving glut of the rich. NBER Working Paper. 2020;(26941). URL: https://www.nber.org/system/files/working_papers/w26941/w26941.pdf (дата обращения: 20.01.2025).

7. Klein M.C., Pettis M. Trade wars are class wars: How rising inequality distorts the global economy and threatens international peace. New Haven, CT: Yale University Press; 2020. 296 p.

8. Jørgensen P.L. The global savings glut and the housing boom. Journal of Economic Dynamics and Control. 2023;146:104563. DOI: 10.1016/j.jedc.2022.104563

9. Stiglitz J.E. Inequality and economic growth. In: Jacobs M., Mazzucato M., eds. Rethinking capitalism: Economics and policy for sustainable and inclusive growth. Chichester: Wiley-Blackwell; 2016:134–155. URL: https://business.columbia.edu/sites/default/files-efs/imce-uploads/Joseph_Stiglitz/Inequality%20and%20Economic%20Growth_0.pdf (дата обращения: 20.01.2025).

10. Rachel L., Smith T.D. Are low real interest rates here to stay? International Journal of Central Banking. 2017;13(3):1–42. URL: https://www.ijcb.org/journal/ijcb17q3a1.pdf (дата обращения: 20.01.2025).

11. Fischer M. The source of financing in mergers and acquisitions. The Quarterly Review of Economics and Finance. 2017;65:227–239. DOI: 10.1016/j.qref.2017.01.003

12. Krinichanskii K.V. The stock market in the structure of sources of financing the Russian economy. Finansy i kredit = Finance and Credit. 2024;30(11):2484–2507. (In Russ.). DOI: 10.24891/fc.30.11.2484

13. Begenau J., Palazzo B. Firm selection and corporate cash holdings. Journal of Financial Economics. 2021;139(3):697– 718. DOI: 10.1016/j.jfineco.2020.09.001

14. Darmouni O., Mota L. The savings of corporate giants. The Review of Financial Studies. 2024;37(10):3024–3049. DOI: 10.1093/rfs/hhae030

15. Chen P., Karabarbounis L., Neiman B. The global rise of corporate saving. Journal of Monetary Economics. 2017;89:1–19. DOI: 10.1016/j.jmoneco.2017.03.004

16. Caballero R.J., Krishnamurthy A. Global imbalances and financial fragility. American Economic Review. 2009;99(2):584–588. DOI: 10.1257/aer.99.2.584

17. Tornell A., Westermann F. Decomposing the effects of financial liberalization: Crises vs. growth. Journal of Banking & Finance. 2006;30(12):3331–3348. DOI: 10.1016/j.jbankfin.2006.05.019

18. Modigliani F., Miller M. How much is a company worth? MM theorem. Transl. from Eng. Moscow: Delo; 2001. 272 p. (In Russ.).

19. Claassen B., Dam L. Heijnen P. Corporate financing policies, financial leverage, and stock returns. North American Journal of Economics and Finance. 2023;68:101992. DOI: 10.1016/j.najef.2023.101992

20. Cortina J.J., Didier T., Schmukler S.L. Corporate borrowing in emerging markets: Fairly long term, but only for a few. World Bank Research & Policy Briefs. 2018;(18). URL: https://documents1.worldbank.org/curated/en/363821539842744052/pdf/130976-RPB-18-Corporate-Borrowing-in-Emerging-Markets.pdf (дата обращения: 21.01.2025).

21. Jeanne O. Debt maturity and the international financial architecture. American Economic Review. 2009;99(5):2135– 2148. DOI: 10.1257/aer.99.5.2135

22. Almeida H., Campello M., Laranjeira B., Weisbenner S. Corporate debt maturity and the real effects of the 2007 credit crisis. Critical Finance Review. 2011;1(1):3–58. DOI: 10.1561/104.00000001

23. Polterovich V. M., Starkov O. Yu. Formation of mortgages in catching-up economies: The problem of transplantation of institutions. Moscow: Nauka; 2007. 196 p. (In Russ.).

24. Tyutyukina E.B., Egorova D.A. State support of investment projects within the framework of an agreement on the protection and promotion of capital investments: A methodological rationale. Finance: Theory and Practice. 2023;27(5):43–54. DOI: 10.26794/2587–5671-2023-27-5-43-54

25. Beetsma R., Giuliodori M., Hanson J., de Jong F. The maturity of sovereign debt issuance in the euro area. Journal of International Money and Finance. 2021;110:102293. DOI: 10.1016/j.jimonfin.2020.102293

26. Bai Y., Kim S.T., MihalacheG.P.The maturity and payment schedule of sovereign debt. NBER Working Paper. 2015;(20896). URL: https://www.nber.org/system/files/working_papers/w20896/w20896.pdf (дата обращения: 22.01.2025).

27. Equiza-Goñi J. Government debt maturity and debt dynamics in euro area countries. Journal of Macroeconomics. 2016;49:292–311. DOI: 10.1016/j.jmacro.2016.01.005

28. Diamond D.W. Financial intermediation and delegated monitoring. The Review of Economic Studies. 1984;51(3):393–414. DOI: 10.2307/2297430

29. Diamond D.W., Dybvig P.H. Bank runs, deposit insurance, and liquidity. Journal of Political Economy. 1983;91(3):401–419. URL: https://www.bu.edu/econ/files/2012/01/DD83jpe.pdf

30. Krinichansky K.V., Annenskaya N.E. Financial markets and institutions. Moscow: RuScience; 2020. 360 p. (In Russ.).