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Is political risk a driver of listed SMEs leverage?

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  • Theofanis Papageorgiou
  • Georgios Savvakis
  • Dimitris Kenourgios

Abstract

This paper employs econometric techniques in order to examine the role of political risk on the capital structure decisions of European listed SMEs, during a period which fully captures the Euro zone debt crisis and aspects of political risk due to the recession and its over-indebtedness. We find that political risk decreases significantly SMEs leverage via different and significant transmission channels. Very small (micro) enterprises are decreasing more significantly their leverage at times of political risk. The strength of the creditor’s rights acts as a proxy for the possible effects of the political risk. Political risk combined with corruption has a positive effect on firm leverage.

Suggested Citation

  • Theofanis Papageorgiou & Georgios Savvakis & Dimitris Kenourgios, 2021. "Is political risk a driver of listed SMEs leverage?," Applied Economics Letters, Taylor & Francis Journals, vol. 28(16), pages 1382-1385, September.
    • Handle: RePEc:taf:apeclt:v:28:y:2021:i:16:p:1382-1385
    DOI: 10.1080/13504851.2020.1819949
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