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| Author: | Hackbarth, D. Miao, J. Morellec, E. |
| Title: | Capital structure, credit risk, and macroeconomic conditions |
| Journal: | Journal of Financial Economics
2006 : DEC, VOL. 82:3, p. 519-550 |
| Index terms: | macroeconomics capital structure of companies risk models |
| Freeterms: | credit spreads |
| Language: | eng |
| Abstract: | In this paper, a framework is developed for analyzing the impact of macroeconomic conditions (hereafter as: m-conds.) on credit risk and dynamic capital structure (as: cap-str.) choice. This paper's model is shown to be able to replicate observed debt levels and the counter-cyclicality of leverage ratios. It is also demonstrated that it can reproduce the observed term structure of credit spreads (as: c-spds.) and generate strictly positive c-spds. for debt contracts. Finally, the impact of m- conds. is characterized on the pace and size of cap-str. changes, and debt capacity. |
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