esults with trends in aggregate debt levels for all U.S. non-financial firms and find evidence consistent with our conclusions. Finally, we look at characteristics of publicly traded non-financial firms that file for bankruptcy around the last three recessions and find evidence suggesting that these firms are increasingly being affected by economic distress as opposed to financial distress. In short, our results suggest that, asa practical matter, residual financial risk is now relatively unimportant for the typical U.S. firm. This raises questions about the level of expected financial distress costs since the probability of financial distress is likely tobe lower monly thought for panies. For example, our results suggest that estimates of the level of systematic risk inbond pricing may be
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