The Secular Decline in Private Firm Leverage / Christine L. Dobridge, Erik P. Gilje, Andrew Whitten.

Format:

Book

Author/Creator:

Dobridge, Christine L.

Contributor:

National Bureau of Economic Research.

Gilje, Erik P.

Whitten, Andrew.

Series:

Working Paper Series (National Bureau of Economic Research) no. w30034.

NBER working paper series no. w30034

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2022.

Summary:

Using firm-level administrative tax data on the 43% of business liabilities in the United States tied to privately held firms, we document dramatic reductions in leverage since the Great Recession. Leverage for the average private firm fell fifteen percent between 2004 and 2018. In contrast, leverage among public firms rose during this period. The decline in leverage among private firms is inconsistent with theories that suggest firm leverage tracks pro-cyclical credit market conditions. Younger and smaller private firms see especially large declines in leverage, and we find that reduced leverage among private firms is correlated with lower investment. Our findings have important implications for theories on how firm leverage and investment relate to economic fluctuations.

Notes:

Print version record

May 2022.