The Accounting Review Vol. 100 No. 5 2025
Corporate Financing Activities and Business Cycle Fluctuations
Abstract
We examine whether corporate financing activities (CFA) in aggregate convey information about the macroeconomy. Using statement of cash flow information to construct a bottom-up measure of CFA, we find that it has significant predictive power for future economic activity when we exclude a small set of firms whose external financing is largely insulated from macroeconomic conditions. This CFA index has predictive power beyond that of the Gilchrist-Zakrajsek credit spread, aggregate earnings, and other macroeconomic indicators in predicting future GDP in both in-sample and out-of-sample forecasting tests. Impulse responses from a structural vector autoregression show that unexpected decreases in this CFA index lead to a large and persistent contraction in economic activity for up to four quarters. Our results suggest that a simple portfolio-based CFA measure helps capture supply-of-capital effects from the financial accelerator mechanism and hence has significant incremental predictive power for real economic activity. Data Availability: Data are available from the public sources cited in the text.
- DOI
- 10.2308/tar-2020-0338
- Volume
- 100
- Issue
- 5
- Pages
- 183-206
- Language
- en
- Sources
- openalex bibtex:phds-export.bib crossref