the Remarkable Instability of Corporate Leverage

Keynote Address by Professor Richard Roll, UCLA
Richard Roll

Watch the highlight of this event.

Professor Richard Roll was invited by the IGF to be the keynote speaker at the conference dinner of the Australasian Finance and Banking Conference (AFBC), which was held at the Shangrila Hotel, Sydney.  The topic of his speech was:

“The Remarkable Instability of Corporate Leverage”   

This speech was based on Professor Roll’s recent paper with Harry DeAngelo. In his speech, Professor Roll challenged the well-accepted conclusion that the corporation keeps their leverage ratio fairly constant over long time periods.  Based on his recent research of American corporations’ leverage ratios, Professor Roll used empirical evidence to show that firm leverage varies remarkably over time although few keep their debt-to-asset ratio consistently above 0.5. His speech also covered research topics regarding the firm target leverage ratio, the converging speed towards the leverage ratio, cross-section variation in leverage, modelling of the firm leverage ratio across time, and possible reasons for the instability of corporate leverage.