Leverage over the Firm Life-Cycle, Firm Growth, and Aggregate Fluctuations

Emin Dinlersoz, Sebnem Kalemli-Ozcan, Henry Hyatt and Veronika Penciakova

No 13337, CEPR Discussion Papers from Centre for Economic Policy Research

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: Firm dynamics; Firm life-cycle; Financial constraints; Aggregate shocks (search for similar items in EconPapers)
JEL-codes: E32 E44 G32 (search for similar items in EconPapers)
Date: 2018-11
New Economics Papers: this item is included in nep-bec, nep-mac, nep-sbm and nep-tid
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Citations: View citations in EconPapers (47)

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