@article{ea5503b2c410416a902a23173e6d8488,
title = "The costs of corporate debt overhang",
abstract = "We make use of rich U.S. data to show that debt overhang significantly reduces firm asset-, capex-, and employee-growth. We show these contractions are likely driven by firm decisions as opposed to the result of credit constraints or changes in investment opportunities. Our measure of overhang – liabilities to cash flow — aligns with traditional theory and focuses on the importance of a firm's debt servicing capacity. It further allows us to capitalize on the COVID-19 shock as a quasi-natural experiment to confirm the impact of overhang on firm investment and growth.",
keywords = "Covid-19, Debt overhang, External funding",
author = "Kristian Blickle and Santos, {Jo{\~a}o A.C.}",
note = "Funding Information: We thank the editor, Franklin Allen, and an anonymous referee as well as George Pennacchi, Bo Becker, Darrell Duffie, Sebnem Kalemli-Ozcan, Arvind Krishnamurthy, Anna Kovner, Adair Morse, Amir Sufi, Enrique Schroth, and seminar participants at the Festschrift in Honor of Douglas Gale, the 2022 Banco de Portugal Financial Intermediation Conference, CEMFI, ECB, NY Fed, Durham University, and Nova SBE for valuable comments. The views stated herein are those of the authors and are not necessarily those of the Federal Reserve Bank of New York, or the Federal Reserve System. Publisher Copyright: {\textcopyright} 2024 Elsevier Inc. All rights are reserved, including those for text and data mining, AI training, and similar technologies.",
year = "2024",
month = oct,
doi = "10.1016/j.jfi.2024.101118",
language = "English",
volume = "60",
journal = "Journal of Financial Intermediation",
issn = "1042-9573",
publisher = "Elsevier",
}