Abstract

http://ssrn.com/abstract=1762289
 
 

References (75)



 
 

Citations (4)



 


 



Leverage Dynamics over the Business Cycle


Michael Halling


Swedish House of Finance

Jin Yu


UNSW Australia Business School, School of Banking and Finance; Financial Research Network (FIRN)

Josef Zechner


Vienna University of Economics and Business

November 21, 2015

AFA 2012 Chicago Meetings Paper

Abstract:     
Surprisingly little is known about the business cycle dynamics of leverage. The existing evidence documents that target leverage evolves pro-cyclically either for all firms or financially constrained ones. In contrast, we show that, on average, 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, data samples, empirical models of leverage, and definitions of leverage. There is a fraction of 10 to 25% of firms with pro-cyclical dynamics whose characteristics are consistent with counter-cyclical dynamics for loss-given-default and probability of default.

Number of Pages in PDF File: 61

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

JEL Classification: G32, G15


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Date posted: February 15, 2011 ; Last revised: November 24, 2015

Suggested Citation

Halling, Michael and Yu, Jin and Zechner, Josef, Leverage Dynamics over the Business Cycle (November 21, 2015). 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
UNSW Australia Business School, School of Banking and Finance ( email )
Sydney, NSW 2052
Australia

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 )
Welthandelsplatz 1
Vienna, Wien A-1019
Austria
Feedback to SSRN


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