The Influence of the Global Crises on the Capital Structure of Public Companies in Developed Countries

This paper examines an impact of the global financial and the COVID-19 crises on a capital structure of public companies from developed countries. A general empirical analysis considers a panel data from 2000 to 2020 and uses the dynamic trade-off model. In addition, a separate cross- sectional evidence is provided for the COVID-19 crisis to assess an indirect effect of pandemic- specific indicators. Firstly, it was found that both global financial and COVID-19 crises affected relationships between capital structure and its determinants but in a heterogeneous way. Secondly, this paper reported that global crises may not necessarily be associated with credit supply constraints and not always result in lower corporate leverages. Furthermore, the graphical analysis showed that even the same direction of movements in leverages may arise through distinct sources such as deviations in debt and equity. Finally, the paper evaluated how corporate leverage was indirectly affected by national governments’ actions against pandemic spread and support programs during 2020. The findings and new insights can benefit governments of all nations in evaluating effectiveness of various support measures in terms of their influence on firm’s solvency. In addition, the results can help corporate managers to understand how particular firm-specific characteristics may affect actual leverage ratios during global crises and an ability to adjust toward target. This will ensure that capital structure determinants are properly managed and companies are better prepared to unexpected shocks.