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The Evolution of Corporate Financial Structure: 1973–1990

Author

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  • Philip Lowe

    (Reserve Bank of Australia)

  • Geoffrey Shuetrim

    (Reserve Bank of Australia)

Abstract

Increases in corporate debt in a variety of countries over the past decade have renewed interest in the relationship between leverage and the macro-economy. In general, the theoretical work on these links has outpaced the empirical research. This paper is an initial attempt to examine changes in corporate financial structure in Australia over the past two decades. It explores the evolution of debt-asset ratios, interest cover ratios, dividend pay-out ratios and the ratio of trade credit to total debt, for a sample of 110 Australian firms, over the years 1973 to 1990. It examines changes in the across firm distribution of the ratios as well as changes in the average ratios. It also examines the relationship between the cyclicality of industry output and earnings on the one hand and the evolution of financial structure on the other.

Suggested Citation

  • Philip Lowe & Geoffrey Shuetrim, 1992. "The Evolution of Corporate Financial Structure: 1973–1990," RBA Research Discussion Papers rdp9216, Reserve Bank of Australia.
    • Handle: RePEc:rba:rbardp:rdp9216
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    File URL: https://www.rba.gov.au/publications/rdp/1992/pdf/rdp9216.pdf
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    References listed on IDEAS

    as
    1. Rama Seth, 1990. "Leverage and cyclicality," Monograph, Federal Reserve Bank of New York, number 1990la.
    2. Ben Bernanke & Mark Gertler, 1990. "Financial Fragility and Economic Performance," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 105(1), pages 87-114.
    3. Richard Cantor, 1990. "A panel study of the effects of leverage on investment and employment," Research Paper 9011, Federal Reserve Bank of New York.
    4. Milton Friedman & Anna J. Schwartz, 1963. "A Monetary History of the United States, 1867–1960," NBER Books, National Bureau of Economic Research, Inc, number frie63-1.
    5. Tim Callen & Steven Morling & Jill Pleban, 1992. "Dividends and Taxation: A Preliminary Investigation," RBA Research Discussion Papers rdp9211, Reserve Bank of Australia.
    6. Rama Seth, 1991. "Patterns of corporate leverage in selected industrialized countries," Research Paper 9107, Federal Reserve Bank of New York.
    7. Finn E. Kydland & Edward C. Prescott, 1990. "Business cycles: real facts and a monetary myth," Quarterly Review, Federal Reserve Bank of Minneapolis, vol. 14(Spr), pages 3-18.
    8. Philip Lowe & Thomas Rohling, 1993. "Agency Costs, Balance Sheets and the Business Cycle," RBA Research Discussion Papers rdp9311, Reserve Bank of Australia.
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    Cited by:

    1. Philip Lowe, 1992. "The Impact of Financial Intermediaries on Resource Allocation and Economic Growth," RBA Research Discussion Papers rdp9213, Reserve Bank of Australia.
    2. Warren Tease & Jenny Wilkinson, 1993. "The Provision of Financial Services – Trends, Prospects and Implications," RBA Research Discussion Papers rdp9315, Reserve Bank of Australia.
    3. Geoffrey Shuetrim & Philip Lowe & Steve Morling, 1993. "The Determinants of Corporate Leverage: A Panel Data Analysis," RBA Research Discussion Papers rdp9313, Reserve Bank of Australia.
    4. Karen Mills & Steve Morling & Warren Tease, 1993. "Balance Sheet Restructuring and Investment," RBA Research Discussion Papers rdp9308, Reserve Bank of Australia.
    5. Philip Lowe & Thomas Rohling, 1993. "Agency Costs, Balance Sheets and the Business Cycle," RBA Research Discussion Papers rdp9311, Reserve Bank of Australia.
    6. Karen Mills & Steven Morling & Warren Tease, 1994. "Balance Sheet Restructuring and Investment," Australian Economic Review, The University of Melbourne, Melbourne Institute of Applied Economic and Social Research, vol. 27(1), pages 83-100, January.

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