2003
DOI: 10.1017/s0022050703541997
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Shattered Rails, Ruined Credit: Financial Fragility and Railroad Operations in the Great Depression

Abstract: I am indebted to the following for useful comments and suggestions: Abstract: The theory of "financial fragility" emphasizes the role of weak balance sheets in propagating and magnifying macroeconomic shocks. I use a new panel dataset to investigate the relationship between financial fragility and real activity on U.S. railroads during 1929-1940. First, I formulate a flexible accelerator model of maintenance expenditures and employment. Then, using the model as a benchmark, I ask whether a firm's degree of lev… Show more

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Cited by 31 publications
(7 citation statements)
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“…Calomiris and Mason (2003) show that leverage is an important determinant of bank distress during the Depression. Schiffman (2003Schiffman ( ) uses 1929Schiffman ( -1940 firm-level data to explore the origins of financial distress and the investment behavior of distressed railroads. He finds that leverage negatively affected maintenance in smaller railroads.…”
Section: B Great Depressionmentioning
confidence: 99%
“…Calomiris and Mason (2003) show that leverage is an important determinant of bank distress during the Depression. Schiffman (2003Schiffman ( ) uses 1929Schiffman ( -1940 firm-level data to explore the origins of financial distress and the investment behavior of distressed railroads. He finds that leverage negatively affected maintenance in smaller railroads.…”
Section: B Great Depressionmentioning
confidence: 99%
“…First, understanding a severe economic shock like the Depression helps in anticipating and responding to a new crisis. While macroeconomists have developed several theories to explain the Depression, and there are several industry‐level case studies (e.g., Bresnehan and Raff, 1991, 1992; Schiffman, 2003), ours is one of the few firm‐level analyses. For example, Bernanke (1983) notes that the “pervasiveness of debtor insolvency” is a major aspect of the Depression that has not been studied adequately.…”
mentioning
confidence: 99%
“…Calomiris and Mason (2003) show that leverage is an important determinant of bank distress during the Depression. Schiffman (2003Schiffman ( ) uses 1929Schiffman ( -1940 firm-level data to explore the origins of financial distress and the investment behavior of distressed railroads. He finds that leverage negatively affected maintenance in smaller railroads.…”
Section: B Great Depressionmentioning
confidence: 99%