Let Them Eat Debt But to What End? - Corporate America after the Great Recession

Abstract

I study the behavior of U.S. non-financial corporates after the financial crisis. I document an increase in the real debt holdings and correspondingly the leverage for these firms. Controlling for firm and time fixed effects, I find a higher long-term debt to asset ratio to be associated with lower capital expenditures and growth in fixed capital post-crisis. This is also true for financially unconstrained firms vis-a-vis pre-crisis. Moreover, firms with a higher share of long-term debt after the crisis appear to have a greater likelihood of repurchasing shares and larger dollar payouts to equity holders. The evidence points to the fact that any loosening in financial constraints as a result of monetary policy actions has had an impact on firms' capital structure and not real investment.