The debt levels of large companies just before the Great Recession of 2007-2009 are strongly linked to local unemployment spikes during that time, a novel study co-authored by an MIT professor finds — adding another dimension to our picture of the recent economic crisis.
“We found that companies with high leverage around 2006 ended up laying off more people,” says Xavier Giroud, the Ford International Career Development Professor of Finance at the MIT Sloan School of Management and co-author of a paper detailing the study’s results. “Companies with a lot of debt may have no other option. That can potentially exacerbate a crisis.”
Read more at MIT News