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The Secular Decline in Private Firm Leverage

Author

Listed:
  • Aymeric Bellon
  • Christine L. Dobridge
  • Erik P. Gilje
  • Andrew Whitten

Abstract

Using firm-level administrative tax data, we document dramatic reductions in private leverage since the Global Financial Crisis, while leverage among public firms rose during this period. Changing firm characteristics are unable to account for this pattern. Younger and smaller private firms experience large declines in leverage. Reduced lever-age among private firms is correlated with lower investment. The decline in private firm leverage and investment is strongly related to plausibly exogenous increases in local area bank capital requirements. Our findings suggest that banks’ credit supply plays a prominent role in explaining the leverage pattern of private firms.

Suggested Citation

  • Aymeric Bellon & Christine L. Dobridge & Erik P. Gilje & Andrew Whitten, 2022. "The Secular Decline in Private Firm Leverage," NBER Working Papers 30034, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:30034
    Note: CF
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    Cited by:

    1. Beck, Thorsten & Peltonen, Tuomas & Perotti, Enrico & Sánchez Serrano, Antonio & Suarez, Javier, 2023. "Corporate credit and leverage in the EU: recent evolution, main drivers and financial stability implications," Report of the Advisory Scientific Committee 14, European Systemic Risk Board.

    More about this item

    JEL classification:

    • G3 - Financial Economics - - Corporate Finance and Governance
    • G30 - Financial Economics - - Corporate Finance and Governance - - - General
    • G31 - Financial Economics - - Corporate Finance and Governance - - - Capital Budgeting; Fixed Investment and Inventory Studies
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill

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