Leverage adjustment analytics: Effect of macroeconomic conditions on emerging economies

In this study, we analyse the impacts of the upper and lower macroeconomic regimes on leverage adjustment. We have selected manufacturing firms from emerging economies for the period of 2012-2022. The dynamic panel threshold model determines the upper and lower regimes for different macroeconomic variables. We used the partial adjustment model and dynamic panel fractional estimator to analyse the leverage speed of adjustment (SOA). Our findings reveal that macroeconomic variables are significant leverage determinants, firms present leverage SOA heterogeneity across countries and macroeconomic regimes, and financially flexible firms tend to have higher SOA than constrained firms in upper and lower macroeconomic regimes.