Research Discussion Paper – RDP 9216 The Evolution of Corporate Financial Structure: 1973–1990


Increases in corporate debt in a variety of countries over the past decade have renewed interest in the relationship between leverage and the macro-economy. In general, the theoretical work on these links has outpaced the empirical research. This paper is an initial attempt to examine changes in corporate financial structure in Australia over the past two decades. It explores the evolution of debt-asset ratios, interest cover ratios, dividend pay-out ratios and the ratio of trade credit to total debt, for a sample of 110 Australian firms, over the years 1973 to 1990. It examines changes in the across firm distribution of the ratios as well as changes in the average ratios. It also examines the relationship between the cyclicality of industry output and earnings on the one hand and the evolution of financial structure on the other.

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