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August 14, 2026Journal of Financial Economic Policy

Financial conservatism, economic sanctions and the dynamics of leverage adjustment: evidence from Iran

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Authors

RSReza SajadpourFNFarzaneh NassirzadehSMSara Mohammadzadeh

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Overview

Econometric analysis reveals that financial conservatism accelerates target leverage adjustment, indicating that severe economic sanctions diminish corporate capital structure rebalancing capacity.

Key Points

  • To evaluate how financial conservatism affects the speed of corporate leverage adjustment and determine how heightened economic sanctions moderate this dynamic.
  • Analyzed 1,944 firm-year observations from non-financial firms listed on the Tehran Stock Exchange between 2011 and 2022.
  • Employed dynamic panel generalized method of moments (GMM) estimation to model leverage adjustment speeds under varying sanction intensities.
  • Financially conservative firms exhibit significantly faster speeds of adjustment toward their target leverage.
  • Intensified economic sanctions weaken the adjustment speed advantage of conservative firms by exacerbating external financing constraints.

Cite This Study

Sajadpour et al. (2026) studied this question.

synapsesocial.com/papers/6a7ec71db70b84ec8b913349https://doi.org/10.1108/jfep-06-2025-0241
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