Debt Overhang, Rollover Risk, and Corporate Investment: Evidence from the European Crisis
No 13336, CEPR Discussion Papers from C.E.P.R. Discussion Papers
We quantify the role of financial factors behind the sluggish post-crisis performance of European firms. We use a firm-bank-sovereign matched database to identify separate roles for firm and bank balance sheet weaknesses arising from changes in sovereign risk and aggregate demand conditions. We find that firms with higher debt levels and a higher share of short-term debt reduce their investment more after the crisis. This negative effect is stronger for firms linked to weak banks with exposures to sovereign risk, signifying increased rollover risk. These financial channels explain about 60% of the decline in aggregate corporate investment.
Keywords: Bank-Sovereign Nexus; debt maturity; Firm Investment; Rollover Risk (search for similar items in EconPapers)
JEL-codes: E0 F0 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-acc, nep-bec, nep-cfn, nep-eec, nep-fdg and nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations View citations in EconPapers (2) Track citations by RSS feed
Downloads: (external link)
CEPR Discussion Papers are free to download for our researchers, subscribers and members. If you fall into one of these categories but have trouble downloading our papers, please contact us at email@example.com
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:cpr:ceprdp:13336
Ordering information: This working paper can be ordered from
http://www.cepr.org/ ... rs/dp.php?dpno=13336
Access Statistics for this paper
More papers in CEPR Discussion Papers from C.E.P.R. Discussion Papers Centre for Economic Policy Research, 33 Great Sutton Street, London EC1V 0DX.
Bibliographic data for series maintained by ().