The feelingis widespread that the financial strength of U.S. corporations has eroded over the past twenty years. This trend is often blamed on some combination of the tax system, inflation and overly optimistic assessments of business risk.This paper examines recent corporate financing developments from along-run perspective. It is concluded that these developments appear less dangerous when viewed in the context of the twentieth century as a whole than when viewed in the context of the post-World War II years. A second major conclusion is that powerful corrective mechanisms are at work to keep corporate financial positions from becoming too risky. These forces have been particularly noticeable over the past ten years. Third, the effects on business financing of the tax system, inflation and business risk are difficult to trace in the aggregate data, and these effects may be less straightforward than has commonly been thought. Finally, it is argued that the degree of economic instability and the relative level of federal government borrowing will be key determinants of future corporate financing patterns.
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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number
1523.
Length: Date of creation: Dec 1984 Date of revision: Handle: RePEc:nbr:nberwo:1523
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References listed on IDEAS Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
Benjamin M. Friedman, 1982.
"Debt and Economic Activity in the United States,"
NBER Chapters,
in: The Changing Roles of Debt and Equity in Financing U.S. Capital Formation, pages 91-110
National Bureau of Economic Research, Inc.
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