Abstract

http://ssrn.com/abstract=1762289
 
 

References (75)



 


 



Leverage Dynamics Over the Business Cycle


Michael Halling


Swedish House of Finance

Jin Yu


University of New South Wales (UNSW) - School of Banking and Finance; Financial Research Network (FIRN)

Josef Zechner


Vienna University of Economics and Business

November 18, 2014

AFA 2012 Chicago Meetings Paper

Abstract:     
Surprisingly little is known about the business cycle dynamics of leverage. The few existing empirical studies report evidence that target leverage evolves pro-cyclically either for all firms (Korteweg and Strebulaev (2013)) or for financially constrained ones (Korajczyk and Levy (2003)). In contrast, we show that target leverage ratios evolve counter-cyclically once cyclicality is measured comprehensively, accounting for variation in explanatory variables and model parameters. These counter-cyclical dynamics are robust to different subsamples of firms (financially constrained and unconstrained firms), data samples (a quarterly, US-only and a yearly, international sample), empirical models of leverage, and definitions of leverage.

Number of Pages in PDF File: 51

Keywords: Empirical Corporate Finance, Capital Structure Dynamics, Business Cycle Variation

JEL Classification: G32, G15

working papers series





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Date posted: February 15, 2011 ; Last revised: November 18, 2014

Suggested Citation

Halling, Michael and Yu, Jin and Zechner, Josef, Leverage Dynamics Over the Business Cycle (November 18, 2014). AFA 2012 Chicago Meetings Paper. Available at SSRN: http://ssrn.com/abstract=1762289 or http://dx.doi.org/10.2139/ssrn.1762289

Contact Information

Michael Halling
Swedish House of Finance ( email )
Drottninggatan 98
111 60 Stockholm
Sweden

Jin Yu
University of New South Wales (UNSW) - School of Banking and Finance ( email )
School of Banking and Finance
Australian School of Business
Sydney, NSW 2052
Australia
HOME PAGE: http://www.asb.unsw.edu.au/schools/Pages/JinYu.aspx
Financial Research Network (FIRN)
C/- University of Queensland Business School
St Lucia, 4071 Brisbane
Queensland
Australia
HOME PAGE: http://www.firn.org.au

Josef Zechner (Contact Author)
Vienna University of Economics and Business ( email )
Heiligenstaedter Strasse 46
Vienna, Wien A-1019
Austria
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