Does geopolitical uncertainty affect leverage and debt maturity?: evidence from MIDAS regression

Khoo, Joye; Cheung, Adrian

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Authors

Khoo, Joye

Cheung, Adrian

Date

2019

Type

Conference Paper

Metadata

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Citation

Khoo, S. and Cheung, A. 2019. Does geopolitical uncertainty affect leverage and debt maturity?: evidence from MIDAS regression. In: the 31st Asian Finance Association Annual Meeting, 7th Jul 2019, Ho Chi Minh City, Vietnam..

Source Conference

31st Asian Finance Association Annual Meeting

Faculty

Faculty of Business and Law

School

School of Economics, Finance and Property

URI

http://hdl.handle.net/20.500.11937/77318

Collection

Curtin Research Publications

Abstract

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.