Debt overhang and investment efficiency

Francesca Barbiero, Alexander Popov and Marcin Wolski

No 2018/08, EIB Working Papers from European Investment Bank (EIB)

Abstract: Using a pan-European data set of 8.5 million firms, this paper finds that firms with high debt overhang invest relatively more than otherwise similar firms if they are operating in sectors facing good global growth opportunities. At the same time, the positive impact of a marginal increase in debt on investment efficiency disappears if firm debt is already excessive, if it is dominated by short maturities, and during systemic banking crises. The results are consistent with theories of the disciplining role of debt, as well as with models highlighting the negative link between agency problems at firms and banks and investment efficiency.

Keywords: Investment effciency; Debt overhang; Banking crises (search for similar items in EconPapers)
JEL-codes: E22 E44 G21 H63 (search for similar items in EconPapers)
Date: 2018
New Economics Papers: this item is included in nep-ban, nep-cfn and nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)

Downloads: (external link)
https://www.econstor.eu/bitstream/10419/190959/1/1043659730.pdf (application/pdf)

Related works:
Working Paper: Debt Overhang and Investment Efficiency (2018)
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: https://EconPapers.repec.org/RePEc:zbw:eibwps:201808

DOI: 10.2867/635983

Access Statistics for this paper

More papers in EIB Working Papers from European Investment Bank (EIB) Contact information at EDIRC.
Bibliographic data for series maintained by ZBW - Leibniz Information Centre for Economics ().