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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.

Suggested Citation

  • Christopher F. Baum & Atreya Chakraborty & Boyan Liu, 2008. "The Impact of Macroeconomic Uncertainty on Firms' Changes in Financial Leverage," Boston College Working Papers in Economics 688, Boston College Department of Economics.
    • Handle: RePEc:boc:bocoec:688
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    References listed on IDEAS

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    Cited by:

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    3. Natalia Nehrebecka & Michał Brzozowski, 2016. "Wpływ niepewności makroekonomicznej na oszczędności przedsiębiorstw," Gospodarka Narodowa. The Polish Journal of Economics, Warsaw School of Economics, issue 5, pages 51-69.
    4. Haeng-Sun Kim, 2019. "Differential Impact of Uncertainty on Exporting Decision in Risk-averse and Risk-taking Firms," Working Papers hal-02128335, HAL.
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    6. 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.
    7. Ahmed Al Samman & Mahmoud Moustafa Otaify, 2017. "How Does Volatility of Characteristics-sorted Portfolios Respond to Macroeconomic Volatility?," International Journal of Economics and Financial Issues, Econjournals, vol. 7(4), pages 300-315.
    8. Muhammad Arif Khan & Xuezhi Qin & Khalil Jebran, 2020. "Uncertainty and leverage nexus: does trade credit matter?," Eurasian Business Review, Springer;Eurasia Business and Economics Society, vol. 10(3), pages 355-389, September.
    9. Sardar Ahmad & Saeed Akbar & Devendra Kodwani & Anwar Halari & Syed Zubair Shah, 2023. "Compliance or non‐compliance during financial crisis: Does it matter?," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 28(3), pages 2348-2366, July.
    10. Christopher Baum & Chi Wan, 2010. "Macroeconomic uncertainty and credit default swap spreads," Applied Financial Economics, Taylor & Francis Journals, vol. 20(15), pages 1163-1171.
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    13. John Oliver, 2020. "The Economic Policy Uncertainty and Firm Investment in Germany," Journal of Accounting, Business and Finance Research, Scientific Publishing Institute, vol. 10(1), pages 34-41.

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    More about this item

    Keywords

    macroeconomic uncertainty; corporate governance; leverage;
    All these keywords.

    JEL classification:

    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance

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