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Lecture 32

# ECON 2209 Lecture 32: 18April_EconStats_Karagodsky Premium

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School
Department
Economics
Course
ECON 2209
Professor
Karagodsky
Semester
Fall

Description
EconStats Notes 18 April 2017 Interaction Eects Companies can sell either equity of bonds. When they issue bonds for the rst time, PD = 1 form this point onward. Say we run a regression and get this formula: Leverage = ^ + Private + PD + PrivateXPD 1 i 2 t 3 Leverage private;PD=0= ^ + 1; plug in 0 for PD ^ Leverage public;PD=0= ^, plug in 0 for private, 0 for PD = the average leverage a private rm has more than a public rm prior 1 to access to a public debt market. 2 Average increase in leverage of a public rm after access ^ ^ ^ ^ Leverage private;PD=1= (^ + 1 + (2+ 3 note: ( 2 ) 3s how much more leverage they issue after access for private rms ^ leverage level for public rms before PD access Dierence between private and public rms before PD access 1 1
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