Corporate Financing Decisions in Emerging Markets: The Role of Bank Financing, Foreign Investment, and Capital Structure in Uzbekistan

This study examines corporate financing decisions in emerging markets with a specific focus on Uzbekistan, analyzing the roles of bank financing, foreign direct investment (FDI), and capital structure choices during the period 2020–2025. Drawing on capital structure theories (trade-off and pecking-order theories) and empirical data from the Central Bank of Uzbekistan and international sources, the research investigates how firms balance internal funds, bank debt, equity, and foreign capital in a bank-dominated financial system undergoing structural reforms. The findings reveal that bank loans remain the primary external financing source, accounting for the overwhelming majority of corporate debt, while FDI inflows increased significantly (reaching USD 4.4 billion in 2025) and provided an important alternative channel for selected firms. Capital structure decisions are strongly influenced by firm profitability, size, asset tangibility, high interest rates (averaging 22–23.5% on national-currency loans), and the continued dominance of state-owned banks (approximately 63–65% of total banking assets). Equity and bond markets, although expanding, still play a limited role. The study concludes that Uzbekistan’s corporate sector largely follows a modified pecking-order pattern adapted to local institutional constraints, and further development of capital markets, reduction of state ownership in banks, and improved investment climate are essential for diversifying financing options and enhancing financial resilience.