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The Response of Firms' Leverage to Uncertainty: Evidence from UK Public versus Non-Public Firms

Caglayan, M. and Rashid, A. (2010) The Response of Firms' Leverage to Uncertainty: Evidence from UK Public versus Non-Public Firms. Working Paper. Department of Economics, University of Sheffield ISSN 1749-8368

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Abstract

This paper empirically investigates the effects of uncertainty on firms' leverage. The analysis is carried out for a large panel of public and non-public UK manufacturing rms over 1999-2008. The empirical results provide evidence that firms use less short-term debt as they go through periods of high uncertainty. The leverage of non-public firms is more sensitive to idiosyncratic uncertainty in comparison to their public counterparts, yet macroeconomic uncertainty a ects both types of firms similarly. We finally end our investigation showing that the total impact of either type of uncertainty on firms' leverage is related to the amount of the cash buffer each firm carries.

Item Type: Monograph (Working Paper)
Copyright, Publisher and Additional Information: The Sheffield Economics Research Paper (SERP) series offers a forum for the research output of the academic staff and research students of the Department of Economics, University of Sheffield. Papers are reviewed for quality and presentation by a departmental editor. However, the contents and opinions expressed remain the responsibility of the authors. All papers may be downloaded free on the understanding that the contents are preliminary and therefore permission from the author(s) should be sought before they are referenced.
Keywords: Cash holdings, Leverage, Public versus Non-public firms, Idiosyncratic versus Macroeconomic uncertainty, Spillover effects, System-GMM
Institution: The University of Sheffield
Academic Units: The University of Sheffield > Faculty of Social Sciences (Sheffield) > Department of Economics (Sheffield) > Sheffield Economics Research Papers Series
Depositing User: Repository Officer
Date Deposited: 29 Oct 2010 14:16
Last Modified: 17 Jun 2014 01:47
Published Version: http://www.shef.ac.uk/economics/research/serps/yea...
Status: Published
Publisher: Department of Economics, University of Sheffield
Identification Number: Sheffield Economic Research Paper Series 2010019
URI: http://eprints.whiterose.ac.uk/id/eprint/42606

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