Citation

Discussion Paper Details

Please find the details for DP14572 in an easy to copy and paste format below:

Full Details   |   Bibliographic Reference

Full Details

Title: The Dynamics of Corporate Debt Structure

Author(s): Michael Halling, Jin Yu and Josef Zechner

Publication Date: April 2020

Keyword(s): business cycle variation, clus- ter analysis, corporate debt structure dynamics and debt concentration

Programme Area(s): Financial Economics

Abstract: We find that US public firms spread out their debt more across different sources in recession quarters, making measures of debt concentration move pro-cyclically. There is substantial cross-sectional variation in these dynamics. Firms with less leverage and higher debt concentration further decrease leverage and increase debt concentration in recessions. The opposite is true for firms with higher leverage and lower debt concentration. The latter (former) group consists of firms that are larger (smaller), less risky (riskier), have fewer (more) growth options and lower (higher) cash levels. While the fraction of total assets funded by bank debt increases in the recession by approximately 18% of its average non-recession level, the equivalent measure for market debt drops by approximately 7%. Bank debt, in particular, term loans, appears to become more attractive during recession quarters, especially for borrowers characterized by high profitability while firm size, in contrast, has a positive effect on the use of market debt in recessions. A cluster analysis shows that a substantial fraction of frms changes its debt policy over the business cycle. For example, 12% of the firms that exclusively use bond-financing pre-recession switch to bank-financing during recessions.

For full details and related downloads, please visit: https://cepr.org/active/publications/discussion_papers/dp.php?dpno=14572

Bibliographic Reference

Halling, M, Yu, J and Zechner, J. 2020. 'The Dynamics of Corporate Debt Structure'. London, Centre for Economic Policy Research. https://cepr.org/active/publications/discussion_papers/dp.php?dpno=14572