Working Paper: NBER ID: w30034
Authors: 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.
Keywords: No keywords provided
JEL Codes: G3; G30; G31; G32
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Increased local bank capital requirements (F65) | Reduced private firm leverage (G32) |
| Reduced private firm leverage (G32) | Lower investment levels (G31) |
| Increased local bank capital requirements (F65) | Reduced credit supply (E51) |
| Reduced credit supply (E51) | Reduced private firm leverage (G32) |
| Private firm leverage (G32) | Investment intensity (G31) |
| Private firm leverage (G32) | Lower investment levels (G31) |