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Determinants of Railroad Capital Structure, 1830-1885

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  • Daniel A. Schiffman

    (Department of Economics, Bar Ilan University)

Abstract

U.S. Railroads suffered repeated financial crises in the 19th and 20th Centuries. These crises were caused by a combination of high debt levels and strongly procyclical revenues and profits. Given the inherent instability of profits, why did railroads depend primarily on debt to finance their initial growth? I find that, over 1830-1885, railroads faced significant agency and control problems, which were partially mitigated by the use of debt. Around 1885, new developments reinforced the initial tendency towards debt-heavy capital structures.

Suggested Citation

  • Daniel A. Schiffman, 2001. "Determinants of Railroad Capital Structure, 1830-1885," Working Papers 2001-15, Bar-Ilan University, Department of Economics.
    • Handle: RePEc:biu:wpaper:2001-15
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