Firm debt structure, firm size and risk volatility in US industrial firms

摘要

US industrial-firm panel data on short-term and long-term borrowing (term debt structure) for annual and quarterly time periods over the years 1995 to 2008 are used to test an insulation hypothesis and a related volatility hypothesis. The former test uses a regression model relating the log of the ratio of accounts payable in trade to Long-Term Debt (LTD) to firm size and other variables. The focus is on the firm's response to the US Federal Reserve (FED)'s monetary policy, where the response is a micro perspective on the earlier macro debate over the existence of bank lending channels. The latter hypothesis uses the panel heteroscedastic variances from the first regression procedure to test for a quadratic-form risk function (either U-shaped or inverted U-shaped) using sigma squared and the Coefficient of Variation (CV) as risk indexes and firm size as a determinant. The findings suggest that there is some evidence that US industrial firms in their borrowing behaviour do insulate themselves from the effects of monetary policy and that retained earnings have a significant role in the insulation effect. The evidence also suggests that the risk index, the net variances of the debt ratio, is related to firm size by a U-shaped quadratic function with most of the actual observations on the downward sloping part of the function. As firm size increases, not only does the term-structure ratio fall, but also the volatility falls and at a falling rate of change, approaching zero for a sufficiently large firm.