Cyclical Behavior of Debt and Equity Using a Panel of Canadian Firms
Francisco Covas () and
Wouter den Haan
Authors registered in the RePEc Author Service: Wouter Denhaan ()
Staff Working Papers from Bank of Canada
We document the cyclical behavior of debt, equity, and retained earnings for different firm categories using firm-level Canadian data. There is evidence of both procyclical equity and debt issuance for all firm categories but the timing differs. In particular, there is strong evidence that equity issuance increases in anticipation of an expansion. During this phase, some substitution between debt and equity takes place. After the expansion has reached its peak, equity issuance starts to decrease and during this phase there is strong evidence of procyclical debt issuance and some substitution out of equity seems to take place. Retained earnings is procyclical except for small firms.
Keywords: Business; fluctuations; and; cycles (search for similar items in EconPapers)
JEL-codes: E32 G32 (search for similar items in EconPapers)
Pages: 42 pages
New Economics Papers: this item is included in nep-bec, nep-cfn, nep-fmk and nep-mac
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Persistent link: https://EconPapers.repec.org/RePEc:bca:bocawp:07-44
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