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The Impact of Macroeconomic Uncertainty on Firms' Changes in Financial Leverage

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  • Christopher F. Baum

    ()
    (Boston College
    DIW Berlin)

  • Atreya Chakraborty

    ()
    (University of Massachusetts-Boston)

  • Boyan Liu

Abstract

We investigate the relationship between a firm's measures of corporate governance, macroeconomic uncertainty and changes in leverage. Recent research highlights the role of governance in financing decisions. Previous research also indicates that macroeconomic uncertainty affects a firm’s ability to borrow. In this paper we investigate how both these channels of influence affects firms' financing decisions. Our findings show that macroeconomic uncertainty has an important role to play, both by itself and in interaction with a measure of corporate governance.

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File URL: http://fmwww.bc.edu/EC-P/wp688.pdf
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Bibliographic Info

Paper provided by Boston College Department of Economics in its series Boston College Working Papers in Economics with number 688.

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Length: 19 pages
Date of creation: 18 Aug 2008
Date of revision:
Publication status: published, International Journal of Finance & Economics, 15:1, 22-30, 2010
Handle: RePEc:boc:bocoec:688

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Web page: http://fmwww.bc.edu/EC/
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Keywords: macroeconomic uncertainty; corporate governance; leverage;

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Cited by:
  1. Roberto Álvarez & Andrés Sagner & Carla Valdivia, 2012. "Liquidity Crises and Corporate Cash Holdings in Chile," The Developing Economies, Institute of Developing Economies, vol. 50(4), pages 378-392, December.
  2. Christopher F Baum & Chi Wan, 2009. "Macroeconomic Uncertainty and Credit Default Swap Spreads," Boston College Working Papers in Economics, Boston College Department of Economics 724, Boston College Department of Economics, revised 03 Mar 2010.
  3. Wang, Yizhong & Chen, Carl R. & Huang, Ying Sophie, 2014. "Economic policy uncertainty and corporate investment: Evidence from China," Pacific-Basin Finance Journal, Elsevier, Elsevier, vol. 26(C), pages 227-243.

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