The Effects Of Uncertainty On The Leverage Of Nonfinancial Firms
"This paper investigates the link between the optimal level of nonfinancial firms' short-term leverage and macroeconomic and idiosyncratic sources of uncertainty. We develop a structural model of a firm's value maximization problem that predicts a negative relationship between uncertainty and optimal levels of borrowing. This proposition is tested using a panel of nonfinancial U.S. firms drawn from the COMPUSTAT quarterly database covering the period 1993-2003. The estimates confirm that as either form of uncertainty increases, firms decrease their levels of short-term leverage. This effect is stronger for macroeconomic uncertainty than for idiosyncratic uncertainty. " Copyright (c) 2008 Western Economic Association International.
If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Volume (Year): 47 (2009)
Issue (Month): 2 (04)
|Contact details of provider:|| Postal: 18830 Brookhurst Street, Suite 304, Fountain Valley, CA 92708 USA|
Web page: http://www.blackwellpublishing.com/journal.asp?ref=0095-2583
More information through EDIRC
|Order Information:||Web: http://www.blackwellpublishing.com/subs.asp?ref=0095-2583|
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Nicolas Bloom & Stephen Bond & John Van Reenen, 2001. "The dynamics of investment under uncertainty," IFS Working Papers W01/05, Institute for Fiscal Studies.
- Inessa Love, 2003.
"Financial Development and Financing Constraints: International Evidence from the Structural Investment Model,"
Review of Financial Studies,
Society for Financial Studies, vol. 16(3), pages 765-791, July.
- Love, Inessa, 2001. "Financial development and financing constraints - international evidence from the structural investment model," Policy Research Working Paper Series 2694, The World Bank.
- Steven M. Fazzari & R. Glenn Hubbard & BRUCE C. PETERSEN, 1988. "Financing Constraints and Corporate Investment," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 19(1), pages 141-206.
- Steven Fazzari & R. Glenn Hubbard & Bruce C. Petersen, 1987. "Financing Constraints and Corporate Investment," NBER Working Papers 2387, National Bureau of Economic Research, Inc.
- Alan J. Auerbach, 1985. "Real Determinants of Corporate Leverage," NBER Chapters,in: Corporate Capital Structures in the United States, pages 301-324 National Bureau of Economic Research, Inc.
- Alan J. Auerbach, 1983. "Real Determinants of Corporate Leverage," NBER Working Papers 1151, National Bureau of Economic Research, Inc.
- Simon Gilchrist & Charles Himmelberg, 1999. "Investment: Fundamentals and Finance," NBER Chapters,in: NBER Macroeconomics Annual 1998, volume 13, pages 223-274 National Bureau of Economic Research, Inc.
- Simon Gilchrist & Charles Himmelberg, 1998. "Investment, Fundamentals and Finance," NBER Working Papers 6652, National Bureau of Economic Research, Inc.
- Andrew Blake, 1999. "An Artificial Neural Network System of Leading Indicators," NIESR Discussion Papers 144, National Institute of Economic and Social Research.
- Christopher F Baum & Mustafa Caglayan & Neslihan Ozkan, 2003. "The Impact of Macroeconomic Uncertainty on Cash Holdings for Non-Financial Firms," Computing in Economics and Finance 2003 69, Society for Computational Economics.
- Christopher F. Baum & Mustafa Caglayan & Neslihan Ozkan & Oleksandr Talavera, 2004. "The Impact of Macroeconomic Uncertainty on Cash Holdings for Non–Financial Firms," Discussion Papers in Economics 04/19, Department of Economics, University of Leicester.
- Christopher F. Baum & Mustafa Caglayan & Neslihan Ozkan & Oleksandr Talavera, 2004. "The Impact of Macroeconomic Uncertainty on Cash Holdings for Non-Financial Firms," Discussion Papers of DIW Berlin 410, DIW Berlin, German Institute for Economic Research.
- Talavera, Oleksandr & Ozkan, Neslihan & Caglayan, Mustafa & Baum, Christopher F., 2004. "The Impact of Macroeconomic Uncertainty on Cash Holdings for Non-Financial Firms," ZEW Discussion Papers 04-10, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
- Joseph P. Byrne & E. Philip Davis, 2005. "Investment and Uncertainty in the G7," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 141(1), pages 1-32, April.
- Professor E. Philip Davis & Joseph Byrne, 2002. "Investment and Uncertainty in the G7," NIESR Discussion Papers 198, National Institute of Economic and Social Research.
- Byrne, Joseph P & Davis, E Philip, 2002. "Investment and Uncertainty in the G7," MPRA Paper 78956, University Library of Munich, Germany.
- Manuel Arellano & Stephen Bond, 1991. "Some Tests of Specification for Panel Data: Monte Carlo Evidence and an Application to Employment Equations," Review of Economic Studies, Oxford University Press, vol. 58(2), pages 277-297.
- Tom Doan, "undated". "RATS program to replicate Arellano-Bond 1991 dynamic panel," Statistical Software Components RTZ00169, Boston College Department of Economics.
- R. Glenn Hubbard & Anil K Kashyap & Toni M. Whited, 1993. "Internal Finance and Firm Investment," NBER Working Papers 4392, National Bureau of Economic Research, Inc.
- Vivek Ghosal & Prakash Loungani, 2000. "The Differential Impact of Uncertainty on Investment in Small and Large Businesses," The Review of Economics and Statistics, MIT Press, vol. 82(2), pages 338-343, May.
- Heitor Almeida & Murillo Campello & Michael S. Weisbach, 2004. "The Cash Flow Sensitivity of Cash," Journal of Finance, American Finance Association, vol. 59(4), pages 1777-1804, 08. Full references (including those not matched with items on IDEAS)