Table 5

Levered versus unlevered firms and speed of adjustment

PreCOVIDCOVIDPreCOVIDCOVID
Over leveredUnder leveredOver leveredUnder leveredOver leveredUnder leveredOver leveredUnder levered
VariableΔBook levΔMarket lev
Book Dev0.014**0.082***0.095***0.052***    
(0.007)(0.006)(0.006)(0.006)    
Market Dev    0.339***0.054***0.310***0.048***
    (0.013)(0.007)(0.012)(0.005)
Constant0.016***−0.017***−0.025***−0.020***−0.061***−0.014***−0.110***−0.027***
(0.002)(0.002)(0.002)(0.001)(0.004)(0.002)(0.004)(0.002)
Observations7,3715,2266,7224,5377,3715,2266,7224,537
R-squared0.2680.3140.2840.2940.4110.2890.3830.366
Firm FEYesYesYesYesYesYesYesYes
Qtr FEYesYesYesYesYesYesYesYes

Note(s): This table refines the estimation from the baseline model specified in Eq. (1) to adjust for the asymmetry in the SOA between over-levered and under-levered firms. The over-levered firms are defined as the leverage higher than the target leverage, and under-levered firms are defined as the leverage lower than the target leverage. PreCOVID and COVID samples range between 2018Q3-2020Q1 and 2020Q2-2021Q4 respectively

Robust standard errors are presented in parentheses. ***p < 0.01, **p < 0.05, *p < 0.1 signifies significance at 1%, 5%, and 10% respectively

Source(s): Table by authors

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