The Effect of Firm-Specific and Macroeconomic Uncertainty on Firm Leverage, Short-Term and Long-Term Debt in the Philippines

Yee Peng Chow, Junaina Muhammad, A.N. Bany-Ariffin, Fan Fah Cheng



Firms often face uncertainties which may affect corporate financing decisions. As uncertainty has potential adverse and destabilizing effects on firms, this study is carried out to examine the influence of firm-specific and macroeconomic uncertainty on firm leverage, short-term and long-term debt. Based on a panel of Philippine listed firms from 2004-2014, we adopt a dynamic panel data estimation technique, namely the Generalized Method of Moments to conduct our analyses. The results provide strong evidence of the adverse influence of firm-specific and macroeconomic uncertainty on leverage. Furthermore, the results indicate that while short-term debt is adversely impacted by firm-specific and macroeconomic uncertainty, long-term debt is merely influenced by macroeconomic uncertainty. This implies that although Philippine firms consider firm-specific and macroeconomic uncertainty in their short-run financing decisions, they are primarily concerned about macroeconomic uncertainty in the long-run. This paper addresses the paucity of research that has been conducted in this area, particularly in the context of developing countries. The findings provide important insights into the way firms derive their short- and long-run corporate financing decisions when encountering uncertainties. The insights can guide policymakers to formulate suitable policies to ensure stability in the business and macroeconomic environment.

Keywords: Firm-specific uncertainty; leverage; long-term debt; macroeconomic uncertainty; short-term debt.


Firma sering berhadapan dengan ketidaktentuan yang boleh menjejaskan keputusan pembiayaan korporat. Memandangkan ketidaktentuan berpotensi mendatangkan kesan buruk dan ketidakstabilan terhadap firma, kajian ini dijalankan untuk menyelidik kesan ketidaktentuan tertentu firma dan makroekonomi terhadap leveraj firma, hutang jangka pendek dan jangka panjang. Berdasarkan panel firma yang disenaraikan di Filipina bagi tempoh 2004-2014, analisis kajian dijalankan menggunakan teknik penganggaran data panel dinamik, iaitu Kaedah Momen Teritlak. Hasil kajian membuktikan bahawa ketidaktentuan tertentu firma dan makroekonomi mempunyai kesan negatif terhadap leveraj. Kajian ini juga mendapati bahawa walaupun hutang jangka pendek dipengaruhi secara negatif oleh ketidaktentuan tertentu firma dan makroekonomi, hutang jangka panjang hanya dipengaruhi oleh ketidaktentuan makroekonomi. Ini menunjukkan bahawa walaupun firma di Filipina mengambil kira ketidaktentuan tertentu firma dan makroekonomi dalam keputusan pembiayaan jangka pendek mereka, mereka hanya mengutamakan ketidaktentuan makroekonomi dalam jangka panjang. Kajian ini mengatasi masalah kekurangan kajian yang pernah dilaksanakan dalam bidang ini, terutamanya dalam konteks negara membangun. Hasil kajian mendedahkan cara firma membuat keputusan pembiayaan jangka pendek dan jangka panjang mereka apabila berhadapan dengan ketidaktentuan. Ini boleh dijadikan panduan kepada pembentuk dasar untuk menggubal dasar yang bersesuaian bagi memastikan kestabilan dalam persekitaran perniagaan dan makroekonomi.

Kata kunci: Ketidaktentuan tertentu firma; leveraj; hutang jangka panjang; ketidaktentuan makroekonomi; hutang jangka pendek.


Capital structure; leverage; macroeconomic uncertainty

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