Capital Structure of Borrowers and Lenders: An Empirical Analysis

Valeriia Dzhamalova ()
Additional contact information
Valeriia Dzhamalova: Knut Wicksell Centre for Financial Studies, Lund University

No 2016/1, Knut Wicksell Working Paper Series from Lund University, Knut Wicksell Centre for Financial Studies

Abstract: This paper analyses the effect of the capital structure of lenders on the capital structure of their borrowers. We provide new evidence on the capital structure determinants of non-financial firms and contribute to the discussion on the effect of the financial sector on the real economy. Using syndicated loan contracts, we identify the most important lenders for each borrower and construct a proxy for the borrower’s banking network. Keeping the effect of size, tangibility, market to book, profitability, and risk fixed, we find that a 1 percentage point increase in the average of lenders’ leverage leads to an increase of 12 basis points in borrowers’ leverage. The positive effect of lenders’ leverage on the leverage of their borrowers implies that further deleveraging of the financial sector may lead to less indebtedness and vulnerability of the real economy. We also find evidence that macroeconomic variables, such as GDP growth and inter-bank short-term interest rates, have explanatory power for the leverage of non-financial companies.

Keywords: Capital structure; Capital regulation; Bank; Borrowers (search for similar items in EconPapers)
JEL-codes: G21 G32 G38 (search for similar items in EconPapers)
Pages: 50 pages
Date: 2016-01-01
Note: Full text versions of the paper: http://www.lusem.lu.se/media/kwc/working-papers/2016/kwc-wp-2016-1.pdf
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://www.lusem.lu.se/media/kwc/working-papers/2016/kwc-wp-2016-1.pdf Complete Working Paper 2016/1 (application/pdf)
Our link check indicates that this URL is bad, the error code is: 404 Not Found (http://www.lusem.lu.se/media/kwc/working-papers/2016/kwc-wp-2016-1.pdf [301 Moved permanently]--> https://www.lusem.lu.se/media/kwc/working-papers/2016/kwc-wp-2016-1.pdf)

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:hhs:luwick:2016_001

Access Statistics for this paper

More papers in Knut Wicksell Working Paper Series from Lund University, Knut Wicksell Centre for Financial Studies Knut Wicksell Centre for Financial Studies, Lund University School of Economics and Management, P.O. Box 7082, S-220 07 Lund, Sweden. Contact information at EDIRC.
Bibliographic data for series maintained by Jens Forssbaeck () and Frederik Lundtofte ( this e-mail address is bad, please contact ).