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http://hdl.handle.net/10419/18295
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| Title: | | Macroeconomic Uncertainty and Firm Leverage  |
| Authors: | | Baum, Christopher F. Stephan, Andreas Talavera, Oleksandr |
| Issue Date: | | 2004 |
| Series/Report no.: | | DIW-Diskussionspapiere 443 |
| Abstract: | | This paper investigates the link between the optimal level of non-financial firms' leverage and macroeconomic uncertainty. We develop a structural model of a firm's value maximization problem that predicts that as macroeconomic uncertainty increases the firm will decrease its optimal level of borrowing. We test this proposition using a panel of non-financial US firms drawn from the COMPUSTAT quarterly database covering the period 1991-2001. The estimates confirm that as macroeconomic uncertainty increases, firms decrease their levels of leverage. Furthermore, we demonstrate that our results are robust with respect to the inclusion of the index of leading indicators. |
| Subjects: | | leverage uncertainty non-financial firms panel data |
| JEL: | | D8 D92 G32 C23 |
| Document Type: | | Working Paper |
| Appears in Collections: | | Publikationen von Forscherinnen und Forschern des DIW DIW-Diskussionspapiere
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