Firm-level political risk and corporate leverage decisions

Date

2022-09-06

Advisors

Journal Title

Journal ISSN

ISSN

Volume Title

Publisher

Elsevier

Type

Article

Peer reviewed

Yes

Abstract

This study examines the effects of firm-level political risk on firm leverage decisions and speed of adjustment. We uncover that firm-level political risk has a negative impact on a firm’s total and long-term leverage. We also find that firms facing high political risk tend to prefer debts with short-term maturity. However, firm-level political risk is positively related to debt specialisation, suggesting that firms are more inclined to adopt fewer debt types when they face high political risk. Further analysis reveals that firms with high political risk are associated with a faster speed of adjustment to target than those with low political risk. Our results are robust to endogeneity concerns and the effects of financial crisis.

Description

The file attached to this record is the author's final peer reviewed version. The Publisher's final version can be found by following the DOI link.

Keywords

Firm-level political risk, leverage, debt maturity, debt specialisation, speed of adjustment, US

Citation

Gyimah D., Danso A., Adu-Ameyaw E. and Boateng A. (2022). Firm-level political risk and corporate leverage decisions. International Review of Financial Analysis, 102354

Rights

Research Institute

Finance and Banking Research Group (FiBRe)