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

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  • Emin Dinlersoz
  • Sebnem Kalemli-Ozcan
  • Henry Hyatt
  • Veronika Penciakova

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.

Suggested Citation

  • Emin Dinlersoz & Sebnem Kalemli-Ozcan & Henry Hyatt & Veronika Penciakova, 2018. "Leverage over the Firm Life-Cycle, Firm Growth, and Aggregate Fluctuations," NBER Working Papers 25226, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:25226
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    JEL classification:

    • E23 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Production
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill

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