Is debt overhang causing firms to underinvest?

Filippo Occhino

Economic Commentary, 2010, issue Jul

Abstract: Many economists have suggested that the weakness of corporate balance sheets is constraining business spending and investment, and that this in turn is impeding growth and the recovery. High levels of debt can depress spending and investment through several channels. This Commentary explains one of them?debt overhang can cause firms to underinvest?and points to ways in which this effect might be inhibiting the recovery.

Keywords: Corporations - Finance; Debt (search for similar items in EconPapers)
Date: 2010
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