Covas, Francisco and Den Haan, Wouter J.
The cyclical behavior of debt and equity finance.
American economic review, 101
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Debt and equity issuance are procyclical for most size-sorted firm categories of listed US firms and the procyclicality of equity issuance decreases monotonically with firm size. At the aggregate level, however, the results for equity issuance are not conclusive due to different behavior of the largest firms, especially those in the top one percent. During a deterioration in economic conditions, firms limit the impact of the reduction in external financing on investment by shedding financial assets. This is true for a worsening in aggregate as well as firm-specific conditions.
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|Library of Congress subject classification:
||H Social Sciences > HB Economic Theory
|Journal of Economic Literature Classification System:
||E - Macroeconomics and Monetary Economics > E3 - Prices, Business Fluctuations, and Cycles > E32 - Business Fluctuations; Cycles
G - Financial Economics > G3 - Corporate Finance and Governance > G32 - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure
L - Industrial Organization > L1 - Market Structure, Firm Strategy, and Market Performance > L11 - Production, Pricing, and Market Structure; Size Distribution of Firms
L - Industrial Organization > L2 - Firm Objectives, Organization, and Behavior > L25 - Firm Performance: Size, Diversification and Scope, Age, Profit, and Sales
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