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The response of firms' leverage to uncertainty: Evidence from UK public versus non-public firms

Listed author(s):
  • Mustafa Caglayan

    ()

    (Department of Economics, The University of Sheffield)

  • Abdul Rashid

This paper empirically investigates the effects of uncertainty on firms' leverage. The analysis is carried out for a large panel of public and non-public UK manufacturing firms over 1999-2008. The empirical results provide evidence that firms use less short-term debt as they go through periods of high uncertainty. The leverage of non-public firms is more sensitive to idiosyncratic uncertainty in comparison to their public counterparts, yet macroeconomic uncertainty affects both types of frms similarly. We fnally end our investigation showing that the total impact of either type of uncertainty on firms' leverage is related to the amount of the cash bu er each firm carries.

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File URL: http://www.shef.ac.uk/economics/research/serps/articles/2010_019.html
File Function: First version, 2010
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Paper provided by The University of Sheffield, Department of Economics in its series Working Papers with number 2010019.

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Length: 49 pages
Date of creation: Oct 2010
Date of revision: Oct 2010
Handle: RePEc:shf:wpaper:2010019
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