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Financial crises, banking regulations, and corporate financing patterns around the world

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  • Ali Gungoraydinoglu
  • Özde Öztekin

Abstract

This study examines financing behavior during financial crises in an international sample of corporate firms including 85 countries from 1987 to 2017. Measuring “financial cyclicality” as the difference between financing levels during normal times and financial crisis times, we document counter‐cyclicality in leverage and pro‐cyclicality in security issuances and debt maturity. Financial crises discourage both debt and equity issuances, with a greater decline in equity, leverage increases, and debt maturity decreases. Public debt markets partially act as spare tire during crises when bank loan supply contracts significantly. Leverage financial counter‐cyclicality is more pronounced in countries with weaker banking regulations.

Suggested Citation

  • Ali Gungoraydinoglu & Özde Öztekin, 2022. "Financial crises, banking regulations, and corporate financing patterns around the world," International Review of Finance, International Review of Finance Ltd., vol. 22(3), pages 506-539, September.
    • Handle: RePEc:bla:irvfin:v:22:y:2022:i:3:p:506-539
    DOI: 10.1111/irfi.12381
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