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Debt Overhang, Rollover Risk, and Corporate Investment: Evidence from the European Crisis

Sebnem Kalemli-Ozcan (), Luc Laeven () and David Moreno

No 24555, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: 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.

JEL-codes: E22 E32 E44 F34 F36 G32 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-ban, nep-big, nep-eec and nep-mac
Date: 2018-04
Note: EFG IFM ME
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Related works:
Working Paper: Debt overhang, rollover risk, and corporate investment: evidence from the European crisis (2019) Downloads
Working Paper: Debt Overhang, Rollover Risk, and Corporate Investment: Evidence from the European Crisis (2018) Downloads
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