J. Mack Robinson College of Business
35 Broad Street, Suite 1243, Atlanta GA 30303
Institutional Affiliation: Georgia State University
NBER Working Papers and Publications
|March 2012||The Mystery of Zero-Leverage Firms|
with Ilya A. Strebulaev: w17946
This paper documents the puzzling evidence that a substantial number of large public non-financial US firms follow a zero-debt policy. Over the 1962-2009 period, on average 10.2% of such firms have zero debt and almost 22% have less than 5% book leverage ratio. Neither industry nor size can account for such puzzling behavior. Zero-leverage behavior is a persistent phenomenon, with 30% of zero-debt firms refrain from debt for at least five consecutive years. Particularly surprising is the presence of a large number of zero-leverage firms who pay dividends. They are more profitable, pay higher taxes, issue less equity, and have higher cash balances than their proxies chosen by industry and size. These firms also pay substantially higher dividends than their proxies and thus their total payou...
Published: The Mystery of Zero-Leverage Firms (co-authored with Baozhong Yang) Journal of Financial Economics, 2013, 109, 1-23