The Secular Decline in Private Firm Leverage

Aymeric Bellon, Christine L. Dobridge, Erik P. Gilje and Andrew Whitten

No 30034, NBER Working Papers from National Bureau of Economic Research, Inc

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.

JEL-codes: G3 G30 G31 G32 (search for similar items in EconPapers)
Date: 2022-05
New Economics Papers: this item is included in nep-bec, nep-cfn, nep-dem, nep-fdg and nep-sbm
Note: CF
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