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Uncertainty, macroprudential policies and corporate leverage: Firm-level evidence
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10.1016:j.cbrev.2020.03.005.pdf
Date
2020-06-01
Author
Yarba, Ibrahim
Güner, Zehra Nuray
Metadata
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This work is licensed under a
Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International License
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This paper investigates the impact of macroprudential policies and uncertainty of economic environment on corporate leverage dynamics over the last decade. This is the first study to investigate the impact of macroprudential policies and uncertainty on leverage dynamics of Turkish non-financial firms using firm-level data. We argue in this paper that persistence of uncertainty should be a more appropriate factor affecting credit dynamics rather than uncertainty. In that sense, we construct a measure of uncertainty by using principal component analysis and a measure of persistence of uncertainty for Turkey. Results from the dynamic panel models with a large set of control variables, provide significant evidence in support of the argument that leverage decisions are affected from the persistence of uncertainty rather than the uncertainty itself. Moreover, both the share of the financial debt in total liabilities and the leverage of Turkish non-financial firms decrease significantly when uncertainty increases persistently and when macroprudential policy tools are tightened. Most strikingly, this is the case only for Small and Medium-Sized Enterprises but not for large firms. (c) 2020 Central Bank of The Republic of Turkey. Production and hosting by Elsevier B.V. This is an open access article under the CC BY-NC-ND license (http://creativecommons.org/licenses/by-nc-nd/4.0/).
Subject Keywords
Macroprudential policy
,
Uncertainty
,
Persistence of uncertainty
,
Firm financial debt
URI
https://hdl.handle.net/11511/40227
Journal
CENTRAL BANK REVIEW
DOI
https://doi.org/10.1016/j.cbrev.2020.03.005
Collections
Department of Business Administration, Article