Heterogeneous Effects of Macroprudential Policies on Firm Leverage and Value

Hyunduk Suh and Jin Young Yang
Additional contact information
Jin Young Yang: Zayed University

No 2021-3, Inha University IBER Working Paper Series from Inha University, Institute of Business and Economic Research

Abstract: We empirically investigate the effect of financial institution-targeted macroprudential policies on firms, using a comprehensive macroprudential policy dataset and corporate panel data across 29 countries. We find that the tightening of macroprudential measures persistently curbs the leverage of firms, while loosening is related to the increase in leverage. We also find that this effect on leverage is heterogeneous across firms, as net macroprudential policy actions reduce the procyclicality of leverage more significantly for small firms and firms with high leverage. Also, we estimate the effect of macroprudential policies on firm value to evaluate potential policy trade-offs as the policies restrict the firms' access to credit during economic booms while protecting them from future financial crises. The effect of macroprudential policies on firm value is generally positive despite the policies' restrictive nature. Further, the effect on firm value is heterogeneous depending on firm characteristics: the positive effect becomes stronger as firms are less leveraged; but this positive effect is weaker for firms that grow faster, suggesting potential costs of macroprudential policies for these firms.

Keywords: Macroprudential policy; Firm heterogeneity; Leverage; Tobin’s Q (search for similar items in EconPapers)
JEL-codes: E51 E58 G18 (search for similar items in EconPapers)
Pages: 42 pages
Date: 2021-09
New Economics Papers: this item is included in nep-cba, nep-ent, nep-fdg, nep-mac and nep-sbm
References: Add references at CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
https://drive.google.com/file/d/1h72OYV5vXMjxxgaDH ... SLT/view?usp=sharing Second version, 2021 (application/pdf)

Related works:
Journal Article: Heterogeneous effects of macroprudential policies on firm leverage and value (2023)
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:inh:wpaper:2021-3

Access Statistics for this paper

More papers in Inha University IBER Working Paper Series from Inha University, Institute of Business and Economic Research Contact information at EDIRC.
Bibliographic data for series maintained by Bogang Jun (bogang.jun@inha.ac.kr).