Security issuance decisions, idiosyncratic risk, and macroeconomic dynamics

Abdul Rashid ()

Journal of Economics and Finance, 2017, vol. 41, issue 4, No 2, 659-678

Abstract: Abstract This paper, using a large panel of UK manufacturing firms, empirically examines firms’ financing decisions under risk. The results reveal that while idiosyncratic risk affects changes in debt negatively, it affects both the issuance of new equity and the use of retained earnings positively. The results also suggest that in periods of high macroeconomic risk, the use of new debt, equity financing, and retained earnings declines. Finally, the analysis provides evidence that both types of risk also have a significant and negative influence on changes in firms’ target leverage.

Keywords: Idiosyncratic risk; Macroeconomic fluctuations; Changes in leverage; External financing decisions; Equity financing; Retained earnings (search for similar items in EconPapers)
JEL-codes: C23 G3 (search for similar items in EconPapers)
Date: 2017
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DOI: 10.1007/s12197-016-9370-x

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