Corporate debt and investment: a firm level analysis for stressed euro area countries
Ralph Setzer () and
No 2101, Working Paper Series from European Central Bank
This paper investigates the link between corporate debt and investment for a group of five peripheral euro area countries. Using ﬁrm-level data from 2005-2014, we postulate a non-linear corporate leverage-investment relationship and derive thresholds beyond which leverage has a negative and signiﬁcant impact on investment. The investment sensitivity of debt increased after 2008 when ﬁnancial distress intensiﬁed and ﬁrms had a lower capacity to ﬁnance investment from internal sources of funds. Our results also suggest that even moderate levels of debt can exert a negative influence on investment for smaller ﬁrms or when proﬁtability is low. JEL Classification: E22, F34, G31, G32
Keywords: corporate debt; debt overhang; investment; leverage; threshold model (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-eec
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)
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:ecb:ecbwps:20172101
Access Statistics for this paper
More papers in Working Paper Series from European Central Bank 60640 Frankfurt am Main, Germany. Contact information at EDIRC.
Bibliographic data for series maintained by Official Publications ().