Have U.S. Corporations Grown Financially Weak?

38 Pages Posted: 20 May 2004 Last revised: 1 Sep 2010

See all articles by Robert A. Taggart

Robert A. Taggart

Boston College - Carroll School of Management; National Bureau of Economic Research (NBER)

Date Written: December 1984

Abstract

The feelingis widespread that the financial strength of U.S. corporations has eroded over the past twenty years. This trend is often blamed on some combination of the tax system, inflation and overly optimistic assessments of business risk.This paper examines recent corporate financing developments from along-run perspective. It is concluded that these developments appear less dangerous when viewed in the context of the twentieth century as a whole than when viewed in the context of the post-World War II years. A second major conclusion is that powerful corrective mechanisms are at work to keep corporate financial positions from becoming too risky. These forces have been particularly noticeable over the past ten years. Third, the effects on business financing of the tax system, inflation and business risk are difficult to trace in the aggregate data, and these effects may be less straightforward than has commonly been thought. Finally, it is argued that the degree of economic instability and the relative level of federal government borrowing will be key determinants of future corporate financing patterns.

Suggested Citation

Taggart, Robert A., Have U.S. Corporations Grown Financially Weak? (December 1984). NBER Working Paper No. w1523. Available at SSRN: https://ssrn.com/abstract=336285

Robert A. Taggart (Contact Author)

Boston College - Carroll School of Management ( email )

140 Commonwealth Avenue
Dept. of Finance
Chestnut Hill, MA 02467
United States
617-552-4113 (Phone)

National Bureau of Economic Research (NBER)

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Cambridge, MA 02138
United States

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