Subprime Crisis Shockwaves: Impacts On Capital Structure In Non-Financial Corporations

Abstract

Based upon a dataset spanning about 2,780 non-financial firms in France over the period 2007- 2019, we explore the impact of the subprime crisis on their leverage ratio and capital structure, comparing the experience of the largest listed and unlisted non-financial corporates. Our results highlight that both listed and unlisted corporates tend to reduce their overall indebtedness ratios during the subprime crisis period and its aftermath, generalizing a significant corporate deleveraging for listed and unlisted firms especially during the post-crisis period. In addition, our findings show that listed corporates become more dependable on short- and medium-term credits than the long-term which may increase the exposure of these corporates to credit and liquidity shocks. While our outcomes reveal a clear preference to long-term debt for unlisted firms by expanding their debt maturities, relying on long-term credits and reducing their dependence on short- and medium-term debt which burden these corporates with short-term charges and payments that cannot afford during the crisis and post-crisis periods.