The Dynamics of Corporate Debt Structure

61 Pages Posted: 2 Dec 2019 Last revised: 29 Jul 2021

See all articles by Michael Halling

Michael Halling

University of Luxembourg

Jin Yu

Monash University -Department of Banking and Finance

Josef Zechner

Vienna University of Economics and Business

Multiple version iconThere are 2 versions of this paper

Date Written: July 29, 2021

Abstract

This paper shows that the average U.S. listed firm spreads out its debt across a larger number of sources and relies more on bank debt in recession periods. Large cross-sectional differences imply that firms' funding strategies diverge sharply during recessions: less levered firms decrease leverage further by concentrating their borrowing in very few debt types; more levered firms increase their leverage and diversify their debt structure, especially by increasing bank debt. A theoretical model of firms' investment and debt structure choices, where private debt is more expensive but offers flexibility to restructure, is able to rationalize these dynamics.

Keywords: corporate debt structure dynamics, debt concentration, business cycle variation, cluster analysis

JEL Classification: G01, G32

Suggested Citation

Halling, Michael and Yu, Jin and Zechner, Josef, The Dynamics of Corporate Debt Structure (July 29, 2021). Swedish House of Finance Research Paper No. 20-3, Available at SSRN: https://ssrn.com/abstract=3488471 or http://dx.doi.org/10.2139/ssrn.3488471

Michael Halling (Contact Author)

University of Luxembourg ( email )

L-1511 Luxembourg
Luxembourg

Jin Yu

Monash University -Department of Banking and Finance ( email )

Melbourne
Australia
+61 3 99034590 (Phone)

HOME PAGE: http://sites.google.com/site/jinyufinecon/

Josef Zechner

Vienna University of Economics and Business ( email )

Welthandelsplatz 1
Vienna, Wien A-1019
Austria

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
349
Abstract Views
1,703
rank
112,541
PlumX Metrics