NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

NBER Working Papers by Mark T. Leary

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Working Papers

October 2014How Does Government Borrowing Affect Corporate Financing and Investment?
with John Graham, Michael R. Roberts: w20581
Using a novel dataset of accounting and market information that spans most publicly traded nonfinancial firms over the last century, we show that U.S. federal government debt issuance significantly affects corporate financial policies and balance sheets through its impact on investors' portfolio allocations and the relative pricing of different assets. Government debt is strongly negatively correlated with corporate debt and investment, but strongly positively correlated with corporate liquidity. These relations are more pronounced in larger, less risky firms whose debt is a closer substitute for Treasuries. Indeed, we find a strong negative relation between the BAA-AAA yield spread and government debt, highlighting the greater sensitivity of more highly rated credit to variation in the su...
February 2014A Century of Capital Structure: The Leveraging of Corporate America
with John Graham, Michael R. Roberts: w19910
Unregulated U.S. corporations dramatically increased their debt usage over the past century. Aggregate leverage - low and stable before 1945 - more than tripled between 1945 and 1970 from 11% to 35%, eventually reaching 47% by the early 1990s. The median firm in 1946 had no debt, but by 1970 had a leverage ratio of 31%. This increase occurred in all unregulated industries and affected firms of all sizes. Changing firm characteristics are unable to account for this increase. Rather, changes in government borrowing, macroeconomic uncertainty, and financial sector development play a more prominent role. Despite this increase among unregulated firms, a combination of stable debt usage among regulated firms and a decrease in the fraction of aggregate assets held by regulated firms over this per...

Forthcoming: A Century of Capital Structure: The Leveraging of Corporate America, John R. Graham, Mark T. Leary, Michael R. Roberts. in Understanding the Capital Structures of Non-Financial and Financial Corporations, Acharya, Almeida, and Baker. 2014

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