The 25 references with contexts in paper Christopher F. Baum, Atreya Chakraborty, Boyan Liu (2008) “The Impact of Macroeconomic Uncertainty on Firms' Changes in Financial Leverage” / RePEc:boc:bocoec:688

1
Baum, C. F., Stephan, A. & Talavera, O. (2008), ‘The effects ofuncertainty on the leverage of non-financial firms’,Economic Inquiry(in press).
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    The conditional variance derived from thisGARCHmodel is 8 averaged to the annual frequency and then employed in the analysis as our measure of macroeconomic uncertainty. 3.2 Econometric specification We test the hypotheses that both corporate governance and macroeconomic uncertainty have important effects on nonfinancial firms’ variations in leverage by extending the econometric model of
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    Baum, Stephan & Talavera (2008).
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    That paper focused on the level of short-term leverage, rather than themeasure that we consider in this work. In our specification, we explain a measure of thenet change in leverage, following Berger et al. (1997), defined as ∆Li,t= ∆Di,t−∆Ei,t Ai,t (1) whereDi,tis book debt,Ei,tis book equity andAi,tis total assets at the end of the current fiscal year.

2
Bebchuk, L., Cohen, A. & Ferrell, A. (2004), What matters in corporate governance?, John M. Olin Center Discussion Papers
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    In order to measure the quality of corporate governance, we use theIRRCdatabase which provides annual data on anti-takeover provisions forthe years 1990, 1993, 1995, 1998, 2000, 2002, and 2004 on anti-takeover provisions. Following Gompers et al. (2003), we use data from IRRC, filling in the missing years, toconstruct an annual governance index (Gindex) and an entrenchment index (Eindex)
    Exact
    (Bebchuk, Cohen & Ferrell (2004))
    Suffix
    as measures of the quality of corporate governance. After merging theCOMPUSTATandIRRCsamples and dropping firm-years with missing data, we obtain about 1,125 firms’ annual characteristics. Descriptive statistics for the variables entering the model are presented in Table 1. 10 4 Empirical findings Estimates of optimal corporate behavior often suffer from endogeneity problems, and the use of instr

3
Berger, P. G., Ofek, E. & Yermack, D. L. (1997), ‘Managerial entrenchment and capital structure decisions’,Journal of Finance52(4), 1411–38.
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  1. In-text reference with the coordinate start=1655
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    : 617–552–3673, fax 617–552–2308, e-mail: baum@bc.edu. 1 Keywords: macroeconomic uncertainty, corporate governance, leverage, JEL: D81, G32, G34 2 1 Introduction There is a large literature, starting with Jensen & Meckling(1976), discussing how agency conflicts affect a firm’s capital structure decisions.Evidence from early work generally indicates that entrenched managers prefer lowerleverage
    Exact
    (Berger, Ofek & Yermack (1997), Garvey & Hanka (1999)).
    Suffix
    In recent years, widely available use of indices to measure shareholder rights (for example, the Gindex of Gompers, Ishii & Metrick (2003)) has produced new results that do not agree with these empirical findings.

  2. In-text reference with the coordinate start=14194
    Prefix
    that both corporate governance and macroeconomic uncertainty have important effects on nonfinancial firms’ variations in leverage by extending the econometric model of Baum, Stephan & Talavera (2008). That paper focused on the level of short-term leverage, rather than themeasure that we consider in this work. In our specification, we explain a measure of thenet change in leverage, following
    Exact
    Berger et al. (1997),
    Suffix
    defined as ∆Li,t= ∆Di,t−∆Ei,t Ai,t (1) whereDi,tis book debt,Ei,tis book equity andAi,tis total assets at the end of the current fiscal year. The resulting empirical specification, employing a dynamicpanel data model, is: ∆Li,t=β0+β1∆Li,t−1+β2Cit+β3Sit+β4Iit+1+β5Iit+β6Gindexi,t+ (2) β7LIt−1+ +β8φt−1+β9Gindexi,t×φi,t−1+fi+τt+eit Ci,t, cash holdings,Si,t, net sales andIi,tis capital investment, eac

4
Bernanke, B. S. & Gertler, M. (1995), ‘Inside the black box: The credit channel of monetary policy transmission’,Journal of Economic Perspectives9, 27–48.
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  1. In-text reference with the coordinate start=6628
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    There is an equally large literature that documents how capital structure choice varies over time. Some of these studies make a strong case that the macroeconomic environment within which firms operate could be an equally important determinant of their financing decision
    Exact
    (Choe, Masulis & Nanda (1993), Gertler & Gilchrist (1994)). Bernanke & Gertler (1995)
    Suffix
    also provide a very extensive discussion of the impact of monetary policy on the cost of borrowing. The purpose of this paper is not to test the adequacy of any of these models that try to explain a firm’s capital structure.

  2. In-text reference with the coordinate start=11804
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    Weakly governed firms should choose less risky projects and and make greater use of debt finance given the lower expected risk of bankruptcy. However, macroeconomic uncertainty also affects a firm’s ability to borrow, and weakly governed firms with high leverage 7 will be more likely to be credit constrained
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    (Bernanke & Gertler (1995)).
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    Once one considers both the incentive to borrow and the ability to borrow, the question of how financing decisions are affected by heightened macroeconomic risk becomes largely an empirical issue. However, we expect the ability to borrow to play a large role in our model.

5
Blundell, R. & Bond, S. (1998), ‘Initial conditions and moment restrictions in dynamic panel data models’,Journal of Econometrics87(1), 115–143.
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  1. In-text reference with the coordinate start=17386
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    We estimate our econometric models using the system dynamic panel data (DPD) estimator. System DPD combines equations in differences of the variables with equations in levels of the variables. In this “system GMM” approach (see
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    Blundell & Bond (1998)),
    Suffix
    lagged levels are used as instruments for differenced equations and lagged differences are used as instruments for level equations. The models are estimated using a first difference transformation to remove the individual firm effect.

6
Byrne, J. P. & Davis, E. P. (2002), Investment and uncertainty in the G7, Discussion papers, National Institute of Economic Research, London.
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    Prefix
    relative to firms with stronger governance. 3 Modelling firms’ choice of leverage A challenge to any study considering the effects of uncertainty on firms’ behavior is the construction of an appropriate proxy for uncertainty. The next subsection describes our strategy in generating a proxy for macroeconomic uncertainty. 3.1 Identifying macroeconomic uncertainty In our investigation, as in
    Exact
    Driver, Temple & Urga (2005) and Byrne & Davis (2002),
    Suffix
    we use a GARCH model to proxy for macroeconomic uncertainty.We believe that this approach is more appropriate compared to alternativessuch as proxies obtained from moving standard deviations of the macroeconomic series (e.g.

7
Choe, H., Masulis, R. W. & Nanda, V. (1993), ‘Common stock offerings across the business cycle : Theory and evidence’,Journal of Empirical Finance1(1), 3–31.
Total in-text references: 1
  1. In-text reference with the coordinate start=6628
    Prefix
    There is an equally large literature that documents how capital structure choice varies over time. Some of these studies make a strong case that the macroeconomic environment within which firms operate could be an equally important determinant of their financing decision
    Exact
    (Choe, Masulis & Nanda (1993), Gertler & Gilchrist (1994)). Bernanke & Gertler (1995)
    Suffix
    also provide a very extensive discussion of the impact of monetary policy on the cost of borrowing. The purpose of this paper is not to test the adequacy of any of these models that try to explain a firm’s capital structure.

8
Core, J. E., Guay, W. R. & Rusticus, T. O. (2006), ‘Does weak governance cause weak stock returns? An examination of firm operating performanceand investors’ expectations’,Journal of Finance61(2), 655–687.
Total in-text references: 1
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    Prefix
    The Gindexis then measured on a scale of 0 to 24, with higher values indicating greater power in the hands of managers and higher agency costs. There is a wide body of literature that documents the impact of these indices on various corporate decisions. For example,
    Exact
    Gompers et al.(2003) and Core, Guay & Rusticus (2006)
    Suffix
    document that firms with a large number of antitakeover provisions have lower operating performance compared to those with a small number of provisions. In a similar spirit Masulis, Wang & Xie (2007) find that theGIndexis related to stockholder reaction to merger announcements, with highGIndexfirms suffering larger losses on the announcement of a takeover attempt.

9
Driver, C., Temple, P. & Urga, G. (2005), ‘Profitability, capacity, and uncertainty: a model of UK manufacturing investment’,Oxford Economic Papers57(1), 120– 141.
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  1. In-text reference with the coordinate start=12811
    Prefix
    relative to firms with stronger governance. 3 Modelling firms’ choice of leverage A challenge to any study considering the effects of uncertainty on firms’ behavior is the construction of an appropriate proxy for uncertainty. The next subsection describes our strategy in generating a proxy for macroeconomic uncertainty. 3.1 Identifying macroeconomic uncertainty In our investigation, as in
    Exact
    Driver, Temple & Urga (2005) and Byrne & Davis (2002),
    Suffix
    we use a GARCH model to proxy for macroeconomic uncertainty.We believe that this approach is more appropriate compared to alternativessuch as proxies obtained from moving standard deviations of the macroeconomic series (e.g.

10
Garvey, G. T. & Hanka, G. (1999), ‘Capital structure and corporate control: The effect of antitakeover statutes on firm leverage’,Journal of Finance54(2), 519– 546.
Total in-text references: 1
  1. In-text reference with the coordinate start=1655
    Prefix
    : 617–552–3673, fax 617–552–2308, e-mail: baum@bc.edu. 1 Keywords: macroeconomic uncertainty, corporate governance, leverage, JEL: D81, G32, G34 2 1 Introduction There is a large literature, starting with Jensen & Meckling(1976), discussing how agency conflicts affect a firm’s capital structure decisions.Evidence from early work generally indicates that entrenched managers prefer lowerleverage
    Exact
    (Berger, Ofek & Yermack (1997), Garvey & Hanka (1999)).
    Suffix
    In recent years, widely available use of indices to measure shareholder rights (for example, the Gindex of Gompers, Ishii & Metrick (2003)) has produced new results that do not agree with these empirical findings.

11
Gertler, M. & Gilchrist, S. (1994), ‘Monetary policy, business cycles, and the behavior of small manufacturing firms’,Quarterly Journal of Economics109, 309–40.
Total in-text references: 1
  1. In-text reference with the coordinate start=6628
    Prefix
    There is an equally large literature that documents how capital structure choice varies over time. Some of these studies make a strong case that the macroeconomic environment within which firms operate could be an equally important determinant of their financing decision
    Exact
    (Choe, Masulis & Nanda (1993), Gertler & Gilchrist (1994)). Bernanke & Gertler (1995)
    Suffix
    also provide a very extensive discussion of the impact of monetary policy on the cost of borrowing. The purpose of this paper is not to test the adequacy of any of these models that try to explain a firm’s capital structure.

13
Gompers, P. A., Ishii, J. & Metrick, A. (2003), ‘Corporate governance and equity prices’,Quarterly Journal of Economics118, 107–155. 14
Total in-text references: 4
  1. In-text reference with the coordinate start=1816
    Prefix
    There is a large literature, starting with Jensen & Meckling(1976), discussing how agency conflicts affect a firm’s capital structure decisions.Evidence from early work generally indicates that entrenched managers prefer lowerleverage (Berger, Ofek & Yermack (1997), Garvey & Hanka (1999)). In recent years, widely available use of indices to measure shareholder rights (for example, the Gindex of
    Exact
    Gompers, Ishii & Metrick (2003))
    Suffix
    has produced new results that do not agree with these empirical findings. Jiraporn & Gleason (2007) argue that since leverage alleviates agency problems, firms with larger agency problems should adopt higher debt ratios.

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    section of the paper, we discuss relevant aspects of these two strands of literature and motivate our study in which they both are intertwined. 2.1 The effects of corporate governance on leverage Agency costs are not observable, but it may be possible to evaluate the quality of corporate governance in a hedonic sense by considering a numberof firm characteristics. This is the approach taken by
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    Gompers et al. (2003)
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    in formingtheirGindexmeasure 5 of the quality of governance. TheGindexis a broad index of antitakeover provisions that influence the likelihood that managers will be able to insulate themselves from the risk of takeover.

  3. In-text reference with the coordinate start=8131
    Prefix
    The Gindexis then measured on a scale of 0 to 24, with higher values indicating greater power in the hands of managers and higher agency costs. There is a wide body of literature that documents the impact of these indices on various corporate decisions. For example,
    Exact
    Gompers et al.(2003) and Core, Guay & Rusticus (2006)
    Suffix
    document that firms with a large number of antitakeover provisions have lower operating performance compared to those with a small number of provisions. In a similar spirit Masulis, Wang & Xie (2007) find that theGIndexis related to stockholder reaction to merger announcements, with highGIndexfirms suffering larger losses on the announcement of a takeover attempt.

  4. In-text reference with the coordinate start=16512
    Prefix
    In order to measure the quality of corporate governance, we use theIRRCdatabase which provides annual data on anti-takeover provisions forthe years 1990, 1993, 1995, 1998, 2000, 2002, and 2004 on anti-takeover provisions. Following
    Exact
    Gompers et al. (2003),
    Suffix
    we use data from IRRC, filling in the missing years, toconstruct an annual governance index (Gindex) and an entrenchment index (Eindex) (Bebchuk, Cohen & Ferrell (2004)) as measures of the quality of corporate governance.

14
Graham, J. R. & Harvey, C. R. (2001), Expectations of equity risk premia, volatility and asymmetry from a corporate finance perspective, NBER Working Papers 8678, National Bureau of Economic Research, Inc.
Total in-text references: 1
  1. In-text reference with the coordinate start=13185
    Prefix
    investigation, as in Driver, Temple & Urga (2005) and Byrne & Davis (2002), we use a GARCH model to proxy for macroeconomic uncertainty.We believe that this approach is more appropriate compared to alternativessuch as proxies obtained from moving standard deviations of the macroeconomic series (e.g., Ghosal & Loungani (2000)) or survey-based measures based on the dispersion of forecasts (e.g.,
    Exact
    Graham & Harvey (2001), Schmukler, Mehrez & Kaufmann (1999)).
    Suffix
    We define a volatility measureφi,tderived from changes in the index of leading indicators (LI) as a proxy for the macro-level uncertainty that firms face intheir financial and production decisions. We build a generalizedARCH(GARCH(1,2)) model for ∆LIwhere the mean equation is an autoregression over 1979m3–2006m12, as reported in Table 1.

15
Havakimian, A., Opler, T. & Titman, S. (2001), ‘The debt-equity choice’,Journal of Financial and Quantitative Analysis36, 1–24.
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    Our empirical findings are presented in Section 4 and Section 5 offers concluding remarks. 4 2 Leverage, macroeconomic uncertainty, and corporate governance Many researchers have considered the importance of firm-specific characteristics as a determinant of firms’ choice of financial leverage
    Exact
    (Titman & Wessels (1988), Havakimian, Opler & Titman (2001)).
    Suffix
    Recently, increasing scrutiny has been focused on agency cost related explanations for firms’ capitalstructure decisions. These studies have generally used different measures of shareholders’ rights to proxy for the quality of corporate governance.

16
Jensen, M. C. & Meckling, W. H. (1976), ‘Theory of the firm: Managerial behavior, agency costs and ownership structure’,Journal of Financial Economics 3(4), 305–360.
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    Corresponding author: Christopher F Baum, Department of Economics, Boston College, Chestnut Hill, MA 02467 USA, Tel: 617–552–3673, fax 617–552–2308, e-mail: baum@bc.edu. 1 Keywords: macroeconomic uncertainty, corporate governance, leverage, JEL: D81, G32, G34 2 1 Introduction There is a large literature, starting with
    Exact
    Jensen & Meckling(1976),
    Suffix
    discussing how agency conflicts affect a firm’s capital structure decisions.Evidence from early work generally indicates that entrenched managers prefer lowerleverage (Berger, Ofek & Yermack (1997), Garvey & Hanka (1999)).

17
Jiraporn, P. & Gleason, K. C. (2007), ‘Capital structure, shareholder rights, and corporate governance’,Journal of Financial Research30(1), 21–33.
Total in-text references: 2
  1. In-text reference with the coordinate start=1921
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    In recent years, widely available use of indices to measure shareholder rights (for example, the Gindex of Gompers, Ishii & Metrick (2003)) has produced new results that do not agree with these empirical findings.
    Exact
    Jiraporn & Gleason (2007)
    Suffix
    argue that since leverage alleviates agency problems, firms with larger agency problems should adopt higher debt ratios. They find that debt ratios are inversely related to measures for better corporate governance for a large sample of non-regulated firms between 1993-2002.

  2. In-text reference with the coordinate start=9219
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    While earlier work indicates that entrenched managers may seek to avoid debt, evidence also exists that entrenched managers may use higher leverage to thwart expected takeovers (Zwiebel (1996)). Recently the use of governance indices to measure agency costs
    Exact
    Jiraporn & Gleason (2007), Wald & Long (2007) and John & Litov (2008))
    Suffix
    has furthered interest on the relation between entrenchment and leverage. While findingsdiffer among these studies, all of them report an inverse association between measures of better governance and leverage.

18
John, K. & Litov, L. (2008), Corporate governance and financing policy: New evidence, Working papers, Stern School of Business, New York University.
Total in-text references: 3
  1. In-text reference with the coordinate start=2218
    Prefix
    Jiraporn & Gleason (2007) argue that since leverage alleviates agency problems, firms with larger agency problems should adopt higher debt ratios. They find that debt ratios are inversely related to measures for better corporate governance for a large sample of non-regulated firms between 1993-2002.
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    John& Litov (2008)
    Suffix
    also find, over a similar period, that manufacturing firms with weaker shareholder rights use more debt financing and have higher leverage between 1993-2004.1They assume that better-governed firms are easier to monitor: it is easier for the market to distinguish between managers’ bad luck versus bad judgment.

  2. In-text reference with the coordinate start=9219
    Prefix
    While earlier work indicates that entrenched managers may seek to avoid debt, evidence also exists that entrenched managers may use higher leverage to thwart expected takeovers (Zwiebel (1996)). Recently the use of governance indices to measure agency costs
    Exact
    Jiraporn & Gleason (2007), Wald & Long (2007) and John & Litov (2008))
    Suffix
    has furthered interest on the relation between entrenchment and leverage. While findingsdiffer among these studies, all of them report an inverse association between measures of better governance and leverage.

  3. In-text reference with the coordinate start=9818
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    Our main contribution is to incorporate in this line of reasoning another important determinant of leverage: macroeconomic uncertainty.We highlight the impact 6 of macroeconomic uncertainty on the governance-leverage relationship. There are hints in other research that this interaction might be significant. For example,
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    John & Litov (2008)
    Suffix
    find that firms with weaker governance enjoy lower bond yields when issuing debt and earn higher credit ratings, allowing thesefirms to issue more debt. Macroeconomic uncertainty should play an important role infirms’ ability to access the capital market.

19
John, K., Litov, L. & Yeung, B. (2008), ‘Corporate governance and risk-taking’, Journal of Finance63(4), 1679–1728.
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    that are exogenous 1Wald & Long (2007) also find a firms that incorporate themselves with states with stronger anti-takeover provisions (i.e., weaker shareholder rights) have a higher debt-to-market ratio. They attribute this to the decrease in firm value associated with anti-takeover amendments. 2A theoretical framework for why entrenched managers may prefer safer investments is developed in
    Exact
    John, Litov & Yeung (2008).
    Suffix
    3 to the operation of the firm and difficult to hedge against may play an important role in any financing decision. There is strong evidence thatfirms time their debt issuance based on macroeconomic conditions (Korajczyk & Levy (2003)).

20
Korajczyk, R. A. & Levy, A. (2003), ‘Capital structure choice: macroeconomic conditions and financial constraints’,Journal of Financial Economics68(1), 75–109.
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  1. In-text reference with the coordinate start=3822
    Prefix
    in firm value associated with anti-takeover amendments. 2A theoretical framework for why entrenched managers may prefer safer investments is developed in John, Litov & Yeung (2008). 3 to the operation of the firm and difficult to hedge against may play an important role in any financing decision. There is strong evidence thatfirms time their debt issuance based on macroeconomic conditions
    Exact
    (Korajczyk & Levy (2003)).
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    However, prior research has not considered how the governance-leverage relationship may be affected by macroeconomic risks. This is the primary contribution of our paper. We first investigate if corporate governance affects firms’ financing decisions.

  2. In-text reference with the coordinate start=10543
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    Leahy & Whited (1996) provide a good reviewof the former, reporting that uncertainty reduces investment in their sample but noting that the theoretical prediction on this question is ambiguous and empirical evidence on this issue remains inconclusive.
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    Korajczyk & Levy (2003)
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    point out an important factor that might explain often-contradictory results on this issue. They find that that financially constrained firms react differently to uncertainty than unconstrained firms.

21
Leahy, J. V. & Whited, T. M. (1996), ‘The effect of uncertaintyon investment: Some stylized facts’,Journal of Money, Credit and Banking28(1), 64–83.
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    We develop this intuition in the next section. 2.2 The effects of macroeconomic uncertainty on leverage Macroeconomic uncertainty affects both the level of firms’ capital investment and how it is financed.
    Exact
    Leahy & Whited (1996)
    Suffix
    provide a good reviewof the former, reporting that uncertainty reduces investment in their sample but noting that the theoretical prediction on this question is ambiguous and empirical evidence on this issue remains inconclusive.

22
Masulis, R. W., Wang, C. & Xie, F. (2007), ‘Corporate governance and acquirer returns’,Journal of Finance62(4), 1851–1889.
Total in-text references: 1
  1. In-text reference with the coordinate start=8357
    Prefix
    For example, Gompers et al.(2003) and Core, Guay & Rusticus (2006) document that firms with a large number of antitakeover provisions have lower operating performance compared to those with a small number of provisions. In a similar spirit
    Exact
    Masulis, Wang & Xie (2007)
    Suffix
    find that theGIndexis related to stockholder reaction to merger announcements, with highGIndexfirms suffering larger losses on the announcement of a takeover attempt. These results indicateGindexcan be considered a reasonable measure of the quality of corporate governance, with low values signifying strong shareholders? rights and high values indicative of agency costs.

23
Schmukler, S., Mehrez, G. & Kaufmann, D. (1999), Predictingcurrency fluctuations and crises - do resident firms have an informational advantage?, Policy Research
Total in-text references: 1
  1. In-text reference with the coordinate start=13185
    Prefix
    investigation, as in Driver, Temple & Urga (2005) and Byrne & Davis (2002), we use a GARCH model to proxy for macroeconomic uncertainty.We believe that this approach is more appropriate compared to alternativessuch as proxies obtained from moving standard deviations of the macroeconomic series (e.g., Ghosal & Loungani (2000)) or survey-based measures based on the dispersion of forecasts (e.g.,
    Exact
    Graham & Harvey (2001), Schmukler, Mehrez & Kaufmann (1999)).
    Suffix
    We define a volatility measureφi,tderived from changes in the index of leading indicators (LI) as a proxy for the macro-level uncertainty that firms face intheir financial and production decisions. We build a generalizedARCH(GARCH(1,2)) model for ∆LIwhere the mean equation is an autoregression over 1979m3–2006m12, as reported in Table 1.

25
Titman, S. & Wessels, R. (1988), ‘The determinants of capital structure choice’, Journal of Finance43(1), 1–19.
Total in-text references: 1
  1. In-text reference with the coordinate start=5905
    Prefix
    Our empirical findings are presented in Section 4 and Section 5 offers concluding remarks. 4 2 Leverage, macroeconomic uncertainty, and corporate governance Many researchers have considered the importance of firm-specific characteristics as a determinant of firms’ choice of financial leverage
    Exact
    (Titman & Wessels (1988), Havakimian, Opler & Titman (2001)).
    Suffix
    Recently, increasing scrutiny has been focused on agency cost related explanations for firms’ capitalstructure decisions. These studies have generally used different measures of shareholders’ rights to proxy for the quality of corporate governance.

26
Wald, J. K. & Long, M. S. (2007), ‘The effect of state laws on capital structure’, Journal of Financial Economics83(2), 297–319.
Total in-text references: 2
  1. In-text reference with the coordinate start=3216
    Prefix
    that poorly governed firms will be associated with more conservative investments and higher use of debt relative to their better-governed counterparts.2 The focus of this paper is to highlight the impact of macroeconomic uncertainty on the relationship between corporate governance and changes in firms’ financial leverage. It is reasonable to assume that economy-wide risks that are exogenous 1
    Exact
    Wald & Long (2007)
    Suffix
    also find a firms that incorporate themselves with states with stronger anti-takeover provisions (i.e., weaker shareholder rights) have a higher debt-to-market ratio. They attribute this to the decrease in firm value associated with anti-takeover amendments. 2A theoretical framework for why entrenched managers may prefer safer investments is developed in John, Litov & Yeung (2008). 3 to the operat

  2. In-text reference with the coordinate start=9219
    Prefix
    While earlier work indicates that entrenched managers may seek to avoid debt, evidence also exists that entrenched managers may use higher leverage to thwart expected takeovers (Zwiebel (1996)). Recently the use of governance indices to measure agency costs
    Exact
    Jiraporn & Gleason (2007), Wald & Long (2007) and John & Litov (2008))
    Suffix
    has furthered interest on the relation between entrenchment and leverage. While findingsdiffer among these studies, all of them report an inverse association between measures of better governance and leverage.

27
Zwiebel, J. (1996), ‘Dynamic capital structure under managerial entrenchment’, American Economic
Total in-text references: 1
  1. In-text reference with the coordinate start=9139
    Prefix
    A good measure of agency costs is important to any empirical work on capital structure as theory suggests the conflicts of interest between firms’ stakeholders may play an important role in any financing decision. While earlier work indicates that entrenched managers may seek to avoid debt, evidence also exists that entrenched managers may use higher leverage to thwart expected takeovers
    Exact
    (Zwiebel (1996)).
    Suffix
    Recently the use of governance indices to measure agency costs Jiraporn & Gleason (2007), Wald & Long (2007) and John & Litov (2008)) has furthered interest on the relation between entrenchment and leverage.