Thread by @sanha926

My latest @NPEjournal article with Joseph Baines has just been published. COVID has amplified longstanding concerns about rising corporate debt. But how do the debt burdens of large non-financial corporations compare to their smaller counterparts? [1/8]
tandfonline.com/doi/full/10.10…

Our findings point to a 'great debt divergence' in the US in recent decades. Large corporations increased their leverage and decreased their debt servicing burdens. Even though smaller corporations de-leveraged, their debt servicing burdens increased [2/8]

Over roughly the same period, the profit margins of large corporations doubled while smaller corporations faced severe losses. In relative terms, our analysis indicates a rapid concentration of power in favour of large firms [3/8]

How do we explain the divergence? Shareholder capitalism! All firms increased shareholder payouts in recent years, but only smaller firms expanded productive capacity. This dual imperative to satisfy shareholders and invest pushes smaller firms into acute financial distress [4/8]

In our estimation, the US government's pandemic response only serves to reinforce and amplify the trends we identify in the article. Large-scale intervention has been biased toward investment-grade debt, while many smaller corporations fall into further financial distress [5/8]

The pandemic represents a missed opportunity for policymakers. Rather than use their fiscal and monetary power to build a more stable and equitable financial system, the Fed and Treasury have instead decided to prop up a highly dysfunctional one [6/8]

Unless there is a radical departure from the current policy regime, the US political economy in the post-COVID 19 world is likely to resemble the pre-COVID 19 one, only with more market turmoil, more concentration, more inequality, and even less investment [7/8]

The article appears to be un-gated at the moment. If that changes, feel free to get in touch. Here is a link to the pre-print version sbhager.com/wp-content/upl… [8/8]