Global leverage adjustments, uncertainty, and country institutional strength
Date of this Version
7-1-2018
Document Type
Article
Rights
default
Abstract
Using a broad range of uncertainty measures, we show that uncertainty dramatically slows down firms’ adjustments toward their optimal capital structure. At the upper bound, the estimated speed of leverage adjustments almost halves when uncertainty is high. High quality institutions (common law legal origin, more disclosure to congress and/or to the public, and higher public sector ethics) and presidential political systems offset some of the adverse effects of uncertainty on leverage adjustments. The financial crisis has altered the relationships among uncertainty, adjustment speeds, and a country's institutions; more so for countries with weak institutions and parliamentary systems.
Recommended Citation
Çolak, Gönül; Gungoraydinoglu, Ali; and Öztekin, Özde, "Global leverage adjustments, uncertainty, and country institutional strength" (2018). College of Business Faculty Publications. 15.
https://digitalcommons.fiu.edu/business_fac/15
