Global leverage adjustments, uncertainty, and country institutional strength

Çolak, Gönül, Gungoraydinoglu, Ali and Öztekin, Özde (2018) Global leverage adjustments, uncertainty, and country institutional strength. Journal of Financial Intermediation, 35. pp. 41-56. ISSN 1042-9573

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Abstract

Using a broad range of uncertainty measures, we show that uncertainty dramatically slows down firms’ adjustments toward their optimal capital structure. At the upper bound, the estimated speed of leverage adjustments almost halves when uncertainty is high. High quality institutions (common law legal origin, more disclosure to congress and/or to the public, and higher public sector ethics) and presidential political systems offset some of the adverse effects of uncertainty on leverage adjustments. The financial crisis has altered the relationships among uncertainty, adjustment speeds, and a country's institutions; more so for countries with weak institutions and parliamentary systems.

Item Type: Article
Schools and Departments: University of Sussex Business School > Accounting and Finance
SWORD Depositor: Mx Elements Account
Depositing User: Mx Elements Account
Date Deposited: 22 Feb 2022 09:11
Last Modified: 22 Feb 2022 09:15
URI: http://sro.sussex.ac.uk/id/eprint/104490

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