Capital Structure and Systematic Risk
34 Pages Posted: 8 Apr 2014 Last revised: 14 Apr 2014
Date Written: April 6, 2014
Systematic risk is an important determinant of corporate capital structure. A one standard deviation increase in asset beta corresponds to a decrease in leverage of 13%, controlling for total asset volatility. This evidence is consistent with recent dynamic capital structure models that relate financing decisions to macroeconomic factors and provides further impetus for exploring the impact of systematic risk on corporate decisions.
Keywords: capital structure, systematic risk
JEL Classification: G32
Suggested Citation: Suggested Citation