Many analysts have voiced
concerns about the indebtedness
of U.S. corporations during
the last several years.
These analysts believed that the
debt buildup of the 1980s would leave firms in
precarious financial condition if and when the
next cyclical downturn arrived; higher debt burdens
would prove difficult to manage when
revenues and cash flows fell in a recession.
Some of these concerns have indeed been borne
out in the most recent cycle, as many firms found
their debt servicing needs remained high while
funds available to meet those needs tapered off.
Analysts have also argued that firms have recently
taken great strides in reducing their debt burdens
and "restructuring their balance sheets." In
this article, I examine some aggregate data for the
U.S. nonfinancial corporate sector and consider
several aspects of the changes in corporate debt
burdens in recent years. In particular, after presenting
some evidence of the debt buildup of the
1980s and its subsequent slowdown, I focus on
the balance sheet restructuring that began in 1990
and continues to the present.