Citation

Discussion Paper Details

Please find the details for DP13355 in an easy to copy and paste format below:

Full Details   |   Bibliographic Reference

Full Details

Title: Firm Leverage and Regional Business Cycles

Author(s): Xavier Giroud and Holger M Mueller

Publication Date: December 2018

Keyword(s): Business Cycles and Firm leverage

Programme Area(s): Financial Economics

Abstract: This paper shows that buildups in firm leverage predict subsequent declines in aggregate regional employment. Using confidential establishment-level data from the U.S. Census Bureau, we exploit regional heterogeneity in leverage buildups by large U.S. publicly listed firms, which are widely spread across U.S. regions. For a given region, our results show that increases in firms' borrowing are associated with "boom-bust" cycles: employment grows in the short run but declines in the medium run. Across regions, our results imply that regions with larger buildups in firm leverage exhibit stronger short-run growth, but also stronger medium-run declines, in aggregate regional employment. We obtain similar results if we condition on national recessions-regions with larger buildups in firm leverage prior to a recession experience larger employment losses during the recession. When comparing regional firm and household leverage growth, we find qualitatively similar patterns for both. Finally, we find that regions whose firm leverage growth comoves more strongly also exhibit stronger comovement in their regional business cycles.

For full details and related downloads, please visit: https://cepr.org/active/publications/discussion_papers/dp.php?dpno=13355

Bibliographic Reference

Giroud, X and Mueller, H. 2018. 'Firm Leverage and Regional Business Cycles'. London, Centre for Economic Policy Research. https://cepr.org/active/publications/discussion_papers/dp.php?dpno=13355