Global leverage adjustments, uncertainty, and country institutional strength
By Gonul Colak, Ali Gungoraydinoglu, Özde Öztekin. Journal of Financial Intermediation, 2018
122 citations recorded by the source corpus.
Abstract Using a broad range of uncertainty measures, we show that uncertainty dramatically slows down firms’ adjustments toward their optimal capital structure. At the upper bound, the estimated speed of leverage adjustments almost halves when uncertainty is high. High quality institutions (common law legal origin, more disclosure to congress and/or to the public, and higher public sector ethics) and presidential political systems offset some of the adverse effects of uncertainty on leverage adjustments. The financial crisis has altered the relationships among uncertainty, adjustment speeds, and a country's institutions; more so for countries with weak institutions and parliamentary systems.
Subfields: Accounting, Economics and Econometrics, Sociology and Political Science
View Paper: https://www.semanticscholar.org/paper/bbf0878508f37ec93134f723ad57515e7f60f952
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Citations in the corpus
- Economic policy uncertainty and banks’ loan pricing (2019, background): “For example, as the degree of economic policy uncertainty increases, the speed of adjustment towards target capital structure slows down (Çolak et al. 2018; Gu et al. 2019) and the leverage ratios of corporate firms tend to decrease due to tight financing environment (Zhang et al.”