Does geopolitical uncertainty affect leverage and debt maturity?: evidence from MIDAS regression
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We argue that geopolitical uncertainty affects market leverage and debt maturity and develop three hypotheses for this purpose. Using a mixed frequency dataset that consists of a new monthly index of geopolitical uncertainty and annual data of market leverage and debt maturity structure, we employ Mixed Data Sampling (MIDAS) regression and find evidence consistent with our argument. In particular, the immediate impact of geopolitical uncertainty on market leverage is negative but its overall impact is positive. In addition, firms tend to shorten their debt maturity structure in the presence of geopolitical uncertainty.
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