Corporate debt Regime under Political, Economic, and climate uncertainties

Sitara Karim and Constantin Gurdgiev

Journal of International Money and Finance, 2025, vol. 153, issue C

Abstract: How do political, economic, and climate uncertainties influence corporate debt decisions across firms with different leverage exposures? This study explores the effects of these macro-level uncertainties on corporate debt strategies using a dataset of 11,305 firm-year observations based on a wide range of methodologies, including random effects GLS, differenced GMM, and system GMM. To explore informational complexity of the macro uncertainties-debt choices nexus, we examine the moderating roles of analyst coverage and market concentration on the given relationship. The findings reveal that political uncertainty significantly increases debt exposures in high-leverage firms, while climate uncertainty reduces leverage across all firms. Economic uncertainty, however, shows no significant effect on debt. The moderating effects of analyst coverage and market concentration are limited, with market concentration positively influencing debt holdings only in high-leverage firms. For policymakers and corporate managers, these insights emphasize the need to incorporate political and climate risks into financial decision-making, particularly for highly leveraged firms.

Keywords: Corporate leverage; Political uncertainty; Economic uncertainty; Climate uncertainty; Capital structure; Debt (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jimfin:v:153:y:2025:i:c:s0261560625000336

DOI: 10.1016/j.jimonfin.2025.103298

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