Firm-level political risk and corporate leverage decisions

Daniel Gyimah, Albert Danso, Emmanuel Adu-Ameyaw, Agyenim Boateng* (Corresponding Author)

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

8 Citations (Scopus)

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.
Original languageEnglish
Article number102354
Number of pages14
JournalInternational Review of Financial Analysis
Volume84
Early online date10 Sept 2022
DOIs
Publication statusPublished - Nov 2022

Keywords

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

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