CORPORATE LEVERAGE AND THE BUSINESS-CYCLE

This paper examines the pattern of corporate leverage in the United States during the 1980s. Firms in other countries increased their debt during this period. However, the United States was the only major industrialized country in which firms experienced increases in both leverage and interest burden. Previous studies analyzing the distribution of corporate debt across sectors in the United States concluded that to the extent a pattern is discernible, highly indebted firms are concentrated in the stable sectors. This study confirms this earlier finding but shows that the U.S. firms that have been increasing their leverage most rapidly have been concentrated in cyclical sectors.