Abstract
We structurally estimate a set of firm- and time-varying measures of the magnitude of external financial constraints. By considering the entire capital structure—equity and debt of various maturities—we identify on which external financing margin(s) a firm is constrained at a given point in time. Using a sample of 10,902 U.S. stock market listed firms from 1989 to 2018, we find that 43% of firm-quarters are equity-constrained but far fewer are constrained to raise short-term debt (33%) or long-term debt (24%). A firm is simultaneously constrained on all three margins only 12% of the time. The prevalence of financial constraints is highly volatile, typically increasing in the runup to and during recessions. While being unconstrained is a persistent state, being constrained is not, with firms that enter a constrained state exiting it again relatively quickly