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The impact of supply-side factors on corporate leverage

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  • Rodríguez-García, Rafael
  • Budría, Santiago

Abstract

This paper studies publicly traded Spanish firms with the objective to determine whether credit conditions and access to fixed-income markets influence corporate leverage. The case of Spain has been selected because the intense restructuring of its banking sector and the subsequent credit crunch experienced by the country between 2009 and 2012 provide an ideal setting to test the impact of supply-side variables. Based on an 8-year panel dataset, a linear regression model is proposed and the problem of cross-sectional correlation is tackled by resorting to the methods developed by Beck and Katz (1995) and Driscoll and Kraay (1998), in addition to the traditional Rogers or clustered standard errors. According to our results, credit conditions and access to public debt markets turn out to be significant determinants of leverage after controlling for the usual demand factors. Furthermore the negative effect of tightening credit conditions on market leverage doubles in the case of firms without access to public debt markets.

Suggested Citation

  • Rodríguez-García, Rafael & Budría, Santiago, 2019. "The impact of supply-side factors on corporate leverage," International Review of Financial Analysis, Elsevier, vol. 64(C), pages 262-272.
    • Handle: RePEc:eee:finana:v:64:y:2019:i:c:p:262-272
    DOI: 10.1016/j.irfa.2019.06.005
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    Cited by:

    1. Zhong, Xi & Ren, Ge, 2023. "Independent and joint effects of CSR and CSI on the effectiveness of digital transformation for transition economy firms," Journal of Business Research, Elsevier, vol. 156(C).

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    More about this item

    Keywords

    Capital structure; Leverage; Credit conditions; Bond market access;
    All these keywords.

    JEL classification:

    • G31 - Financial Economics - - Corporate Finance and Governance - - - Capital Budgeting; Fixed Investment and Inventory Studies
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill

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