Government debt and corporate leverage: International evidence
We empirically investigate the impact of government debt on corporate financing decisions in an international setting. We show a negative relation between government debt and corporate leverage using data on 40 countries between 1990–2014. This negative relation is stronger for government debt that...
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| Veröffentlicht in: | Journal of financial economics 2019-08, Vol.133 (2), p.337-356 |
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| container_end_page | 356 |
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| container_issue | 2 |
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| container_title | Journal of financial economics |
| container_volume | 133 |
| creator | Demirci, Irem Huang, Jennifer Sialm, Clemens |
| description | We empirically investigate the impact of government debt on corporate financing decisions in an international setting. We show a negative relation between government debt and corporate leverage using data on 40 countries between 1990–2014. This negative relation is stronger for government debt that is financed domestically, for firms that are larger and more profitable, and in countries with more developed equity markets. To address potential endogeneity concerns, we use an instrumental variable approach based on military spending and a quasi-natural experiment based on the introduction of the Euro currency. Our findings suggest that government debt crowds out corporate debt. |
| doi_str_mv | 10.1016/j.jfineco.2019.03.009 |
| format | Article |
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| ispartof | Journal of financial economics, 2019-08, Vol.133 (2), p.337-356 |
| issn | 0304-405X 1879-2774 |
| language | eng |
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| source | Elsevier ScienceDirect |
| subjects | Capital structure Corporate debt Corporate finance Crowding out Crowds Defense spending Deficit financing Equity financing Government debt Leverage Markets Money |
| title | Government debt and corporate leverage: International evidence |
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