Does the external environment matter for the persistence of firms' debt policy?

Zhen Huang, Weiwei Gao and Liying Chen

Finance Research Letters, 2020, vol. 32, issue C

Abstract: This paper investigates the existence of debt policy persistence and further explores the effects of external environment on the persistence of debt policy from the perspectives of micro-level and macro-level, respectively. We find that both capital structure policy and debt maturity policy are persistent, supporting the path dependence theory and imprinting theory. Another conclusion is that the macro-level financial crisis does significantly reduce the persistence of debt policy, while micro-level environmental uncertainty has no effect on the debt policy persistence. These results suggest that the firms’ debt policy persistence is more likely to be disrupted by a drastic increase in macro-level systemic risk compared with micro-level non-systemic risk.

Keywords: Initial debt policy; Persistence; Environmental uncertainty; Financial crisis (search for similar items in EconPapers)
JEL-codes: D92 G32 (search for similar items in EconPapers)
Date: 2020
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (8)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:32:y:2020:i:c:s1544612318304975

DOI: 10.1016/j.frl.2018.12.021

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