Macroeconomic conditions, financial constraints, and firms’ financing decisions
We examine how time-varying macroeconomic conditions affect firms’ financing decisions. A principal components decomposition of several macroeconomic variables characterizes three phases of the business cycle relative to recessions: early recovery, robust recovery, and economic crest; a fourth repre...
| Main Authors: | , , |
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| Other Authors: | |
| Format: | Journal Article |
| Language: | English |
| Published: |
2019
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| Subjects: | |
| Online Access: | https://hdl.handle.net/10356/103277 http://hdl.handle.net/10220/48010 |
| _version_ | 1811685888385613824 |
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| author | Chang, Xin Chen, Yunling Dasgupta, Sudipto |
| author2 | Nanyang Business School |
| author_facet | Nanyang Business School Chang, Xin Chen, Yunling Dasgupta, Sudipto |
| author_sort | Chang, Xin |
| collection | NTU |
| description | We examine how time-varying macroeconomic conditions affect firms’ financing decisions. A principal components decomposition of several macroeconomic variables characterizes three phases of the business cycle relative to recessions: early recovery, robust recovery, and economic crest; a fourth represents “windows of opportunity” in capital markets that are unrelated to recessions. This characterization yields results that traditional approaches miss. Specifically, debt issuance exhibits a non-monotonic pattern during the upward phase of the business cycle: it declines in robust recovery relative to recessions but peaks at the economic crest. Financially constrained firms issue more equity during windows of high stock market valuation, whereas unconstrained firms time debt issuance in response to debt market spreads. |
| first_indexed | 2024-10-01T04:51:41Z |
| format | Journal Article |
| id | ntu-10356/103277 |
| institution | Nanyang Technological University |
| language | English |
| last_indexed | 2024-10-01T04:51:41Z |
| publishDate | 2019 |
| record_format | dspace |
| spelling | ntu-10356/1032772023-05-19T07:31:16Z Macroeconomic conditions, financial constraints, and firms’ financing decisions Chang, Xin Chen, Yunling Dasgupta, Sudipto Nanyang Business School DRNTU::Business::Finance Debt Maturity Capital Structure We examine how time-varying macroeconomic conditions affect firms’ financing decisions. A principal components decomposition of several macroeconomic variables characterizes three phases of the business cycle relative to recessions: early recovery, robust recovery, and economic crest; a fourth represents “windows of opportunity” in capital markets that are unrelated to recessions. This characterization yields results that traditional approaches miss. Specifically, debt issuance exhibits a non-monotonic pattern during the upward phase of the business cycle: it declines in robust recovery relative to recessions but peaks at the economic crest. Financially constrained firms issue more equity during windows of high stock market valuation, whereas unconstrained firms time debt issuance in response to debt market spreads. Accepted version 2019-04-11T02:35:25Z 2019-12-06T21:08:56Z 2019-04-11T02:35:25Z 2019-12-06T21:08:56Z 2019 2018 Journal Article Chang, X., Chen, Y., & Dasgupta, S. (2019). Macroeconomic conditions, financial constraints, and firms’ financing decisions. Journal of Banking & Finance, 101242-255. doi:10.1016/j.jbankfin.2018.10.016 0378-4266 https://hdl.handle.net/10356/103277 http://hdl.handle.net/10220/48010 209794 209794 10.1016/j.jbankfin.2018.10.016 209794 209794 en Journal of Banking and Finance Journal of Banking and Finance © 2018 Elsevier. All rights reserved. This paper was published in Journal of Banking and Finance and is made available with permission of Elsevier. 53 p. application/pdf |
| spellingShingle | DRNTU::Business::Finance Debt Maturity Capital Structure Chang, Xin Chen, Yunling Dasgupta, Sudipto Macroeconomic conditions, financial constraints, and firms’ financing decisions |
| title | Macroeconomic conditions, financial constraints, and firms’ financing decisions |
| title_full | Macroeconomic conditions, financial constraints, and firms’ financing decisions |
| title_fullStr | Macroeconomic conditions, financial constraints, and firms’ financing decisions |
| title_full_unstemmed | Macroeconomic conditions, financial constraints, and firms’ financing decisions |
| title_short | Macroeconomic conditions, financial constraints, and firms’ financing decisions |
| title_sort | macroeconomic conditions financial constraints and firms financing decisions |
| topic | DRNTU::Business::Finance Debt Maturity Capital Structure |
| url | https://hdl.handle.net/10356/103277 http://hdl.handle.net/10220/48010 |
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