Working Paper: CEPR ID: DP13337
Authors: Sebnem Kalemli-Ozcan; Emin Dinlersoz; Henry Hyatt; Veronika Penciakova
Abstract: We create a novel dataset by merging the Census Bureau’s Longitudinal Business Dynamics data with firm-level financial information from Moody’s-Orbis. We find that firm leverage varies over a firm’s life-cycle, acting as a binding constraint only in certain times. As a result, the impact of a financial shock on employment depends on where firm is in its life-cycle at the onset of the shock. While highly leveraged small firms accounted for 3% of total U.S. employment, their employment response contributed up to 5% of excess job losses during Great Recession.
Keywords: leverage; census data; firm lifecycle; financial constraints; age; short-term debt
JEL Codes: E0
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Firm Size (L25) | Leverage (G32) |
| Leverage (Private Firms) (G32) | Growth (Private Firms) (L25) |
| Leverage (Public Firms) (G32) | Growth (Public Firms) (L25) |
| Age (Private Firms) (L26) | Leverage (G32) |
| Age (Public Firms) (L26) | Leverage (G32) |
| Financial Crisis (Great Recession) (G01) | Leverage (Private Firms) (G32) |
| Financial Crisis (Great Recession) (G01) | Leverage (Public Firms) (G32) |