Economics at your fingertips  

Corporate debt and investment: a firm analysis for stressed euro area countries

Stefan Gebauer (), Ralph Setzer () and Andreas Westphal

No 2101, Working Paper Series from European Central Bank

Abstract: This paper investigates the link between corporate debt and investment for a group of fi ve 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 signi ficant impact on investment. The investment sensitivity of debt increased after 2008 when financial distress intensifi ed and fi rms 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 pro fitability is low. JEL Classification: E22, F34, G31, G32

Keywords: corporate debt; debt overhang; investment; leverage; threshold model (search for similar items in EconPapers)
Date: 2017-09
New Economics Papers: this item is included in nep-eec
Note: 1128184
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (9) Track citations by RSS feed

Downloads: (external link) (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link:

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 ().

Page updated 2021-04-24
Handle: RePEc:ecb:ecbwps:20172101