Systemic Banking Crises, Institutional Environment, and Corporate Leverage
Date of this Version
1-1-2020
Document Type
Article
Rights
default
Abstract
This study examines corporate leverage during systemic banking crises in an international setting including 85 countries from 1987 to 2017. Using the historically determined component of institutions and exogenous variations in institution building, the analyses show that leverage cyclicality varies substantially across institutional settings. Leverage is strongly counter-cyclical under more binding constraints on the capital supply, suggesting important supply effects of such crises on leverage. Weak institutions are more conducive to crises and uncertainty. Leverage counter-cyclicality is more pronounced during crises that coincide with higher uncertainty, whereas leverage is pro-cyclical with stronger legal systems and information sharing in capital markets.
Recommended Citation
Öztekin, Özde, "Systemic Banking Crises, Institutional Environment, and Corporate Leverage" (2020). College of Business Faculty Publications. 14.
https://digitalcommons.fiu.edu/business_fac/14
