Financial Environment and the Value-Leverage Relation
Raj Aggarwal, NyoNyo Kyaw, Xinlei Zhao
We find that the value-leverage relation varies considerably in magnitude across countries. We argue that this difference in value Indeed, we find that the value impact of leverage is less negative in bank-oriented countries and more negative in countries with highly developed stock markets. Further, leverage-value relation seems to be more sensitive to institutional settings among high-growth firms than among low-growth firms. These findings are robust to alternate model specifications and sub-sample selections.