A macroeconomic approach to corporate capital structure

Mitsuru Katagiri

Journal of Monetary Economics, 2014, vol. 66, issue C, 79-94

Abstract: The cross-sectional distribution of corporate capital structure and its macroeconomic implications are underexplored research areas. This paper embeds a dynamic trade-off theory of firm financing into a general equilibrium model with firm dynamics. I find that the stationary equilibrium replicates fairly well the distribution of leverage as well as the relationship between leverage, size and profitability. The counterfactual experiment points out relatively small effects of tax benefits on corporate capital structure. It also implies that the effects of the default cost on macroeconomic variables are almost negligible under endogenous capital structure choice.

Keywords: Corporate capital structure; Dynamic trade-off theory; Firm dynamics (search for similar items in EconPapers)
Date: 2014
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Citations: View citations in EconPapers (16)

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Working Paper: A Macroeconomic Approach to Corporate Capital Structure (2011)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:moneco:v:66:y:2014:i:c:p:79-94

DOI: 10.1016/j.jmoneco.2014.04.003

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