Does money supply shape corporate capital structure? International evidence from a panel data analysis

Julio Pindado, Ignacio Requejo and Juan C. Rivera

The European Journal of Finance, 2020, vol. 26, issue 6, 554-584

Abstract: We investigate how the growth rate of money supply, as a key dimension of the monetary policy, affects corporate debt decisions using a broad sample of companies from developed and emerging economies. Although expansionary measures increase market liquidity and encourage the use of debt, our results show that there is an optimal level of money supply beyond which additional liquidity discourages firms from using debt. However, the intensity of the effect of money growth on debt and the level of liquidity at which firms’ access to debt financing is maximized depends on the characteristics of the banking system. The effect is mitigated in countries where banks hold a higher fraction of liquid assets. By contrast, the relation between money supply and corporate leverage is more pronounced when a higher proportion of banks’ resources are allocated to private credit.

Date: 2020
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
http://hdl.handle.net/10.1080/1351847X.2019.1695645 (text/html)
Access to full text is restricted to subscribers.

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:taf:eurjfi:v:26:y:2020:i:6:p:554-584

Ordering information: This journal article can be ordered from
http://www.tandfonline.com/pricing/journal/REJF20

DOI: 10.1080/1351847X.2019.1695645

Access Statistics for this article

The European Journal of Finance is currently edited by Chris Adcock

More articles in The European Journal of Finance from Taylor & Francis Journals
Bibliographic data for series maintained by Chris Longhurst ().