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http://ssrn.com/abstract=281430
 
 

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Capital Structure Choice: Macroeconomic Conditions and Financial Constraints


Robert A. Korajczyk


Northwestern University - Kellogg School of Management

Amnon Levy


Moody's KMV

June 17, 2002

AFA 2002 Atlanta Meetings; Kellogg School of Mgmt. Finance Working Paper No. 279

Abstract:     
This paper provides new evidence of how macroeconomic conditions affect capital structure choice. We model firms' target capital structures as a function of macroeconomic conditions and firm-specific variables. We split our sample based on a measure of financial constraints. Target leverage is counter-cyclical for the relatively unconstrained sample, but pro-cyclical for the relatively constrained sample. Macroeconomic conditions are significant for issue choice for unconstrained firms but less so for constrained firms. Our results support the hypothesis that unconstrained firms time their issue choice to coincide with periods of favorable macroeconomic conditions, while constrained firms do not.

Number of Pages in PDF File: 50

Keywords: Capital structure, Business cycles, Financial constraints

JEL Classification: G1, G32, E32

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Date posted: March 4, 2002  

Suggested Citation

Korajczyk, Robert A. and Levy, Amnon, Capital Structure Choice: Macroeconomic Conditions and Financial Constraints (June 17, 2002). AFA 2002 Atlanta Meetings; Kellogg School of Mgmt. Finance Working Paper No. 279. Available at SSRN: http://ssrn.com/abstract=281430 or http://dx.doi.org/10.2139/ssrn.281430

Contact Information

Robert A. Korajczyk
Northwestern University - Kellogg School of Management ( email )
2001 Sheridan Road
Evanston, IL 60208
United States
847-491-8336 (Phone)
847-491-5719 (Fax)
Amnon Levy (Contact Author)
Moody's KMV ( email )
405 Howard Street
Suite 140
San Francisco, CA 94105
United States
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