Capital Structure and Systematic Risk

Schwert, Michael; Strebulaev, Ilya A.

doi:10.2139/ssrn.2421020

Capital Structure and Systematic Risk

Rock Center for Corporate Governance at Stanford University Working Paper No. 178

34 Pages Posted: 8 Apr 2014 Last revised: 14 Apr 2014

See all articles by Michael Schwert

Michael Schwert

University of Pennsylvania - The Wharton School

Ilya A. Strebulaev

Stanford University - Graduate School of Business; National Bureau of Economic Research

Date Written: April 6, 2014

Abstract

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

Schwert, Michael and Strebulaev, Ilya A., Capital Structure and Systematic Risk (April 6, 2014). Rock Center for Corporate Governance at Stanford University Working Paper No. 178. Available at SSRN: https://ssrn.com/abstract=2421020 or http://dx.doi.org/10.2139/ssrn.2421020