The Impact of Macroeconomic Uncertainty on Firms' Changes in Financial Leverage

Christopher Baum (), Atreya Chakraborty () and Boyan Liu

No 688, Boston College Working Papers in Economics from Boston College Department of Economics

Abstract: We investigate the relationship between a firm’s measures of corporate governance, macroeconomic uncertainty and changes in leverage. Recent research highlights the role of governance in financing decisions. Previous research also indicates that macroeconomic uncertainty affects a firm’s ability to borrow. In this paper we investigate how both these channels of influence affects firms' financing decisions. Our findings show that macroeconomic uncertainty has an important role to play, both by itself and in interaction with a measure of corporate governance.

Keywords: macroeconomic uncertainty; corporate governance; leverage (search for similar items in EconPapers)
JEL-codes: D81 G32 G34 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-bec, nep-cfn and nep-mac
Date: Written 2008-08-18
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