The Dynamics of Corporate Debt Structure

70 Pages Posted: 2 Dec 2019 Last revised: 31 May 2022

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: May 28, 2022

Abstract

This paper shows that the average U.S. listed firm increases leverage and implements a more diversified debt structure during recessions by increasing the share of private debt. In the cross-section, borrowing strategies diverge: approximately 40% of firms decrease leverage and increase debt concentration by reducing the proportion of public debt, while the remaining 60% increase leverage and decrease debt concentration by augmenting public debt with private debt. Characteristics of these two samples of firms differ sharply. A model of corporate investment and financing choices, where private debt is more expensive but offers flexibility to restructure, can 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 (May 28, 2022). 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

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