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Articles 1 - 2 of 2
Full-Text Articles in Social and Behavioral Sciences
Natural Disaster Risk And Corporate Leverage, Ahmed Elnahas, Dongnyoung Kim, Incheol Kim
Natural Disaster Risk And Corporate Leverage, Ahmed Elnahas, Dongnyoung Kim, Incheol Kim
Economics and Finance Faculty Publications and Presentations
Firms located in more disaster-prone counties adopt more conservative leverage policies than those in less disaster-prone counties. Compared to peers in the least disastrous areas, firms in the most disastrous areas are less levered by 3.6 percentage points, equivalent of foregoing $13.47 million. We argue that this systematic difference in leverage is attributed to elevated operating disruption, increased cost of capital, and tightened financial flexibility. Our findings indicate that firms incorporate natural disaster risk in financing decision, which is consistent with the trade-off theory of capital structure.
Local Investors’ Preferences And Capital Structure, Binay K. Adhikari, David C. Cicero, Johan Sulaeman
Local Investors’ Preferences And Capital Structure, Binay K. Adhikari, David C. Cicero, Johan Sulaeman
Economics and Finance Faculty Publications and Presentations
We provide evidence that publicly listed firms respond to capital supply conditions shaped by local investing preferences. The local supply of credit is higher and more stable in areas where demographics suggest that local investors prefer safer portfolios. We find that firms headquartered in these areas use more debt financing. The demographics-leverage relation is more pronounced for non-investment-grade and unrated firms that cannot easily tap public markets (about two-thirds of U.S. public companies). Analyses of firms’ financing activities around exogenous shocks to credit supplies – including interstate banking deregulation and the 2008-2009 financial crisis – support the capital supply effect. …