Macroeconomic environment and corporate financethe role of monetary policy, labour markets and economic uncertainty

Abstract

The motivation of this dissertation relies, firstly, on analysing the influence of monetary policy on capital structure throughout the business cycle after the financial crisis of 2008, given the major role that central banks (European and England Central Banks mainly) played in the corporate debt overhang that took place before the crisis and the severe financial difficulties that firms faced afterwards. Secondly, this crisis revealed that countries’ labour market affects the resilience of their firms to face adverse situations. Therefore, it is interesting to study how labour market conditions impact the indirect costs of financial distress that affect companies’ flexibility to cope with the environment and, thus, their bankruptcy risk. Finally, the crisis increased the uncertainty and the information gap between economic agents. Our study analyses how economic policy uncertainty -a market imperfection that exacerbates asymmetric information and opportunism- affects the capital structure, and how countries’ institutions and firms’ strategies can act as shields to alleviate these problems.