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.


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