The Response of Firms' Leverage to Risk: Evidence from UK Public versus Non-Public ManufacturingFirms

Mustafa Caglayan () and Abdul Rashid ()

No 1302, CFI Discussion Papers from Centre for Finance and Investment, Heriot Watt University

Abstract: This paper empirically investigates the effects of macroeconomic and firm-specific risk on firms' leverage. The analysis is carried out for a large panel of public and non-public UK manufacturing firms over the period 1999-2008. Our investigation provides evidence that UK manufacturing firms use less short-term debt during periods of high risk. However, the leverage of non-public manufacturing firms is more sensitive to firm-specific risk in comparison to their public counterparts while macroeconomic risk affects both types of firms similarly. Our investigation also shows that firms with high liquid assets reduce their leverage more (less) during periods of heightened firm-specific (macroeconomic) risk.

Date: 2013
New Economics Papers: this item is included in nep-bec and nep-sbm
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Related works:
Journal Article: THE RESPONSE OF FIRMS' LEVERAGE TO RISK: EVIDENCE FROM UK PUBLIC VERSUS NONPUBLIC MANUFACTURING FIRMS (2014)
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Persistent link: https://EconPapers.repec.org/RePEc:hwe:cfidps:1302

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