Starjournal Quotation Halling, Michael, Yu, Jin, Zechner, Josef. 2016. Leverage Dynamics over the Business Cycle. Journal of Financial Economics. 122 (1), 21-41.




Surprisingly little is known about the business cycle dynamics of leverage. The existing evidence documents that target leverage evolves pro-cyclically either for all firms or financially constrained ones. In contrast, we show that, on average, target leverage ratios evolve counter-cyclically once cyclicality is measured comprehensively, accounting for variation in explanatory variables and model parameters. These counter-cyclical dynamics are robust to different subsamples of firms, data samples, empirical models of leverage, and definitions of leverage. There is a fraction of 10 to 25% of firms with pro-cyclical dynamics whose characteristics are consistent with counter-cyclical dynamics for loss-given-default and probability of default.


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Publication's profile

Status of publication Published
Affiliation WU
Type of publication Journal article
Journal Journal of Financial Economics
Citation Index SSCI
WU Journalrating 2009 A+
Starjournal Y
Language English
Title Leverage Dynamics over the Business Cycle
Volume 122
Number 1
Year 2016
Page from 21
Page to 41
Reviewed? Y
Open Access N


Halling, Michael (Former researcher)
Yu, Jin (Former researcher)
Zechner, Josef (Details)
Institute for Finance, Banking and Insurance IN (Details)
Research Institute for Capital Markets FI (Details)
Research areas (Ă–STAT Classification 'Statistik Austria')
5305 Bank management (Details)
5307 Business and management economics (Details)
5358 Corporate finances (Details)
5361 Financial management (Details)
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