Leverage dynamics over the business cycle

Halling, Michael; Yu, Jin; Zechner, Josef

doi:10.1016/j.jfineco.2016.07.001

Cited by 137 publications

(90 citation statements)

References 61 publications

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“…On the other hand, both the costs of deviating from the target leverage ratio and the costs of adjustment are affected by a firm's institutional, legal, and financial environment (Antoniou et al, 2008;Öztekin and Flannery, 2012). Finally, macroeconomic conditions may have an impact on firms' time-varying abilities to readjust subsequent to a leverage shock, as recession periods are often accompanied by a shortage of capital supply (Cook and Tang, 2010;Halling et al, 2012). Moreover, during recessions most of the traditional capital structure variables experience significant shocks, thus changes in the macroeconomic state will affect leverage dynamics.…”

Section: Introductionmentioning

confidence: 99%

Heterogeneity in the Speed of Capital Structure Adjustment across Countries and over the Business Cycle

Drobetz

Schilling²,

Schröder

2014

Euro Fin Management

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This study analyses the heterogeneity in the speed of capital structure adjustment. Using a doubly-censored Tobit estimator that accounts for mechanical mean reversion in leverage ratios, the speed of adjustment is 25% per year in a large international sample, supporting the economic relevance of the trade-off theory. Differences in the adjustment speed across financial systems are attributable to differences in the costs of adjustment. Macroeconomic and micro-level supply-side constraints also affect the dynamics of leverage. Firms adjust more slowly during recessions, and the business cycle effect on adjustment speed is most pronounced for financially constrained firms in market-based countries.

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Section: Introductionmentioning

confidence: 99%

Heterogeneity in the Speed of Capital Structure Adjustment across Countries and over the Business Cycle

Drobetz

Schilling²,

Schröder

2014

Euro Fin Management

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“…and Halling et al (2012)). Regarding firm specific variables, Faulkender et al (2012) find that large (in absolute value) operating cash flow drives more aggressive changes of leverage towards the target; in Byoun (2008) most adjustments of actual toward the target debt ratio occur when firms face a financial deficit or surplus; also in Dang et al (2012) firms with large financing imbalances, large investments or low earnings volatility, adjust faster.…”

Section: A15 -Heterogeneous Ways To Escape From Linearitymentioning

confidence: 90%

“…14 This strand of literature counts a long and non exhaustive list: Fisher et al (1989), Gilson (1997), Roberts (2002), de Haas andPeeters (2006), Drobetz and Wanzenried (2006), Byoun (2008), Cook and Tang (2010), DeAngelo et al (2011), Florysiak (2011), Aybar-Arias et al (2012), Dang et al (2012), Faulkender et al (2012, Halling et al (2012), Korteweg and Strebulaev (2012), Warr et al (2012), Baum et al (2014). Recently, Pereira-Alves and Ferreira (2011), and Oztekin and Flannery (2012) use dummy interactions to extend the international comparison (in the linear model context) of Antoniou et al (2008) to explore the effect of country-specific institutional determinants.…”

Section: Extending the State-of-art Models To Heterogeneity Under Altmentioning

confidence: 99%

Dynamic Corporate Capital Structure Behavior: Empirical Assessment in the Light of Heterogeneity and Non Stationarity

2015

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Understanding the dynamics of the leverage ratio is at the heart of the empirical research about firms' capital structure, as they can be very different under alternative theoretical models. The pillars of almost all empirical applications are the maintained assumptions of poolability and stationarity, which are motivated by the need of model's simplicity and treatability, rather than being based on an empirical ground. In this paper we provide robust evidence of non-stationarity for a significantly large share of US firms' debt ratios and of strong heterogeneity in the speeds at which firms adjust towards their targets. These results stimulate new directions of the empirical research on debt ratio dynamics by relying more on the concept of heterogeneous degree of leverage persistence.

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“…In this case, the amount of cash holdings helps to explain leverage levels. Prior researchers (Halling, Yu & Zechner, 2016;Alan & Gaur, 2018: Serrasqueiro, 2017Aivazian et al, 2005;Ridha & Bajka, 2010;Bassey et al, 2017) have argued that financing is directly linked with the investment as financial decisions are normalcy compelled with the investment. There is also view It is argued that the lowering the level of debt will mitigate the bankrupt risk and ultimately provides incentives for investment.…”

Section: Corporate Cash Holdings Investmnet and Capital Structurementioning

confidence: 99%

The Simultaneity of Corporate Financial Decisions Under Different Levels of Managerial Ownership: A Case of Pakistani Listed Firms

Hidthiir¹,

Basheer²,

Hassan³

2019

RWE

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Purpose-The prime objective of the current study is to investigate the interdepended of financial decision. In addition to that the impact of different level of managerial ownership on the interdepended of financial decisions is also examined agency theory, pecking order theory and the signaling theory are used as the theoretical lenses to draw the theocratical framework.Design/methodology/approach-The balance panel of 161 nonfinancial firm over the period of five years from 2013 to 2017 is used to achieve the research objectives. Polled OLS, Fixed effect and Random effect estimates are employed to answer the reach questions Findings-The managerial ownership with an average mean ownership of 39 is appeared at the top. Interestingly more than 75 percent firms are being controlled by mangers and in more than 60 percent firms of our sample the controlling managers hold more than 40 percent of shares. The Wu Hausman test is performed to determine the existence of the endogeneity problem. The results indicates that the financial decisions namely cash holding decisions, financing decisions and investment decisions has significant impact on each other. Where the managerial ownership is in nonlinear relationship with financial decisions. The results of the study are also providing support to agency theory, pecking order theory and the signaling theory Research implications-The study will be helpful for policymakers, researchers, corporate personals and financial institutions in understanding the interrelationship between financing decisions and the role of managerial ownership in there interdepended.Originality/value-The study is among the pioneering studies on the issue and will provide policy guideline on the said issues

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Leverage dynamics over the business cycle

Cited by 137 publications

References 61 publications

Heterogeneity in the Speed of Capital Structure Adjustment across Countries and over the Business Cycle

Heterogeneity in the Speed of Capital Structure Adjustment across Countries and over the Business Cycle

Dynamic Corporate Capital Structure Behavior: Empirical Assessment in the Light of Heterogeneity and Non Stationarity

The Simultaneity of Corporate Financial Decisions Under Different Levels of Managerial Ownership: A Case of Pakistani Listed Firms

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