Accounting for Leverage in Intangible and Tangible Investments Across the Business Cycle

Authors

Neil Mauskar, Boston UniversityFollow

Abstract

In this paper, I study the role of the leverage ratio and its impact on investing in tangible and intangible goods. The results confirm the hypotheses outlined in the introduction. Specifically, the results show that when accounting for differences in the leverage ratio between firms, investment is cyclical. However, when looking only at firms with low leverages, intangible investing becomes countercyclical. Moreover, during recessions, firms with lower leverages tend to invest more than firms with higher leverages. Finally, the results argue for the existence of financial frictions between investing in tangibles and intangibles.

Recommended Citation

Mauskar, Neil (2018) "Accounting for Leverage in Intangible and Tangible Investments Across the Business Cycle," Undergraduate Economic Review: Vol. 15: Iss. 1, Article 1.
Available at: https://digitalcommons.iwu.edu/uer/vol15/iss1/1