Table 6

Effects of liquidity on the speed of leverage adjustment – conditional on leverage deviation and target instability

Hypothesis 3Hypothesis 4Both hypotheses
VariablesBLEV t+1 (1)MLEV t+1 (2)BLEV t+1 (3)MLEV t+1 (4)BLEV t+1 (5)MLEV t+1 (6)
LEV0.7380***0.8020***0.6920***0.6560***0.8000***0.6210***
(0.000)(0.000)(0.000)(0.000)(0.000)(0.000)
LIQ−0.0005***−0.0002***−0.0001−0.0004***−0.0002***−0.0024***
(0.000)(0.000)(0.122)(0.000)(0.000)(0.000)
LIQ × LEV0.0024***0.0005***0.0007***0.0004***0.0012***0.0063***
(0.000)(0.000)(0.000)(0.006)(0.000)(0.000)
LevDev−0.0260***0.0176***  −0.0056***0.0303***
(0.000)(0.000)  (0.000)(0.000)
LEV × LevDev0.0806***−0.111***  0.0133***−0.102***
(0.000)(0.000)  (0.000)(0.000)
LIQ × LevDev0.0003***0.0001***  0.0002***0.0019***
(0.000)(0.000)  (0.000)(0.000)
LIQ × LEV × LevDev−0.0018***−0.0004***  −0.0008***−0.0048***
(0.000)(0.000)  (0.000)(0.000)
ΔTarget  −0.0040***−0.00070.0135***−0.0085**
  (0.000)(0.818)(0.000)(0.016)
LEV × ΔTarget  −0.0149***0.0642***−0.0638***0.0765***
  (0.000)(0.000)(0.000)(0.000)
LIQ × ΔTarget  −0.00000.0005***0.0000***0.0005***
  (0.789)(0.000)(0.000)(0.000)
LIQ × LEV × ΔTarget  −0.0002***−0.0008***−0.0004***−0.0016***
  (0.000)(0.000)(0.000)(0.000)
ControlYesYesYesYesYesYes
Year fixed effectsYesYesYesYesYesYes
Observations10,93810,9384,6454,0376,2936,901
Number of id1,6091,6091,0881,0811,2061,257
AR(2)0.08940.01370.49310.91310.23390.3835
p-value Hansen test0.72750.50680.38350.27220.16990.2211

Note(s): This tables reports the regression results for the effects of liquidity measures on the leverage SOA in high and low leverage deviation firms, and high and low instability in target, based on whether the firm’s leverage deviation position/instability in target is above or below the median for full sample using two-step system GMM. The variable definition are in  Appendix. ***, ** and * indicate significance at the 1, 5 and 10% levels, respectively. The p-values are in parenthesis

Source(s): The table is created by authors

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