Firm Debt Structure and Firm Size: A Micro Approach
Micro industrial firm panel data on short-term and long-term borrowing (term debt structure) for annual and quarterly time periods over the years 1995-2008 are used to test an insulation hypothesis and a related volatility hypothesis. The former test uses a regression model relating the ratio of accounts payable in trade to long-term debt to firm size and other variables. The focus is on a micro perspective of the firm’s response to the FED’s monetary policy. If differs from an earlier macro perspective that focused on the existence of bank lending channels. The latter hypothesis uses the panel heteroscedastic variances recovered from the first testing procedure to test for a quadratic-form risk function (either U-shaped or inverted U-shaped) using sigma squared and the coefficient of variation as risk indexes and firm size as a determinant. The findings suggest that there is some evidence that firms do insulate themselves from the effects of monetary policy and that retained earnings have a significant role in the insulation effect. The evidence also suggests that the risk index, the variances, is related to firm size by a U-shaped quadratic function. As firm size increases, not only does the term-structure ratio fall, but the volatility falls and at a falling rate of change, approaching zero for a sufficiently large firm.
|Date of creation:||2010|
|Date of revision:|
|Contact details of provider:|| Postal: |
Phone: (801) 581-7481
Fax: (801) 585-5649
Web page: http://economics.utah.edu
More information through EDIRC
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.:
- Mark Gertler & Simon Gilchrist, 1993.
"The role of credit market imperfections in the monetary transmission mechanism: arguments and evidence,"
Finance and Economics Discussion Series
93-5, Board of Governors of the Federal Reserve System (U.S.).
- Gertler, Mark & Gilchrist, Simon, 1993. " The Role of Credit Market Imperfections in the Monetary Transmission Mechanism: Arguments and Evidence," Scandinavian Journal of Economics, Wiley Blackwell, vol. 95(1), pages 43-64.
- Anil K Kashyap & Jeremy C. Stein & David W. Wilcox, 1992.
"Monetary Policy and Credit Conditions: Evidence From the Composition of External Finance,"
NBER Working Papers
4015, National Bureau of Economic Research, Inc.
- Kashyap, Anil K & Stein, Jeremy C & Wilcox, David W, 1993. "Monetary Policy and Credit Conditions: Evidence from the Composition of External Finance," American Economic Review, American Economic Association, vol. 83(1), pages 78-98, March.
- Anil K. Kashyap & Jeremy C. Stein & David W. Wilcox, 1991. "Monetary policy and credit conditions: evidence from the composition of external finance," Finance and Economics Discussion Series 154, Board of Governors of the Federal Reserve System (U.S.).
- Ben S. Bernanke & Alan S. Blinder, 1989.
"The federal funds rate and the channels of monetary transmission,"
89-10, Federal Reserve Bank of Philadelphia.
- Bernanke, Ben S & Blinder, Alan S, 1992. "The Federal Funds Rate and the Channels of Monetary Transmission," American Economic Review, American Economic Association, vol. 82(4), pages 901-21, September.
- Ben Bernanke, 1990. "The Federal Funds Rate and the Channels of Monetary Transnission," NBER Working Papers 3487, National Bureau of Economic Research, Inc.
- Stephen D. Oliner & Glenn D. Rudebusch, 1995. "Is there a bank lending channel for monetary policy?," Economic Review, Federal Reserve Bank of San Francisco, pages 1-20.
When requesting a correction, please mention this item's handle: RePEc:uta:papers:2010_05. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ()
If references are entirely missing, you can add them using this form.