The Impact of COVID-19 Economic Crisis on the Speed of Adjustment toward Target Leverage Ratio: An International Analysis

18 Pages Posted: 6 Jul 2021

See all articles by Thi Thuy Anh Vo

Thi Thuy Anh Vo

University of Economics - University of Da Nang

Mieszko Mazur

IESEG School of Management

Thi Hong An Thai

Danang University of Economics

Date Written: June 19, 2021

Abstract

This paper investigates changes in the speed of adjustment toward target leverage ratio under the impact of COVID-19 economic crisis. Using an international sample of publicly listed firms, we find that, on average, firms tend to adjust their capital structure more rapidly in the period following the breakout of COVID-19. Furthermore, we find that firms domiciled in countries in which COVID-19 causes more severe damage, adjust their target leverage quicker than firms domiciled in less severely affected countries. Overall, our study aims at developing a better un- derstanding of the impact of COVID-19 on corporate financing decisions.

Keywords: capital structure, leverage ratio, speed of adjustment, COVID-19

JEL Classification: G32, G31

Suggested Citation

Vo, Thi Thuy Anh and Mazur, Mieszko and Thai, Thi Hong An, The Impact of COVID-19 Economic Crisis on the Speed of Adjustment toward Target Leverage Ratio: An International Analysis (June 19, 2021). Finance Research Letters, Forthcoming, Available at SSRN: https://ssrn.com/abstract=3870235 or http://dx.doi.org/10.2139/ssrn.3870235

Thi Thuy Anh Vo (Contact Author)

University of Economics - University of Da Nang ( email )

71 Ngu Hanh Son
Ngu Hanh Son
Danang City, Danang City 0511
Vietnam

Mieszko Mazur

IESEG School of Management ( email )

Parvis de la Défense
Paris, 92800
France

Thi Hong An Thai

Danang University of Economics ( email )

71 Ngu Hanh Son
Ngu Hanh Son
Danang City, Danang City 0511
Vietnam

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