Global leverage adjustments, uncertainty, and country institutional strength

Gönül Çolak, Ali Gungoraydinoglu and Ozde Oztekin ()

Journal of Financial Intermediation, 2018, vol. 35, issue PA, 41-56

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.

Keywords: Institutions; International; Leverage; Uncertainty; Speed of adjustment; Financial crisis (search for similar items in EconPapers)
JEL-codes: G30 G32 G35 (search for similar items in EconPapers)
Date: 2018
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (61)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S1042957318300160
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:jfinin:v:35:y:2018:i:pa:p:41-56

DOI: 10.1016/j.jfi.2018.01.010

Access Statistics for this article

Journal of Financial Intermediation is currently edited by Elu von Thadden

More articles in Journal of Financial Intermediation from Elsevier
Bibliographic data for series maintained by Catherine Liu ().