Debt overhang and investment efficiency

Arbeitspapier

Using a pan-European dataset of 8.5 million firms, we find 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. Our 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.

Object Details

• ISBN: 978-92-899-3318-6
• Language: Englisch

References and Relationships

• Bibliographic citation: Series: ECB Working Paper ; No. 2213

Classification and Topics

• Classification: Wirtschaft ; Investment; Capital; Intangible Capital; Capacity ; Financial Markets and the Macroeconomy ; Banks; Depository Institutions; Micro Finance Institutions; Mortgages ; National Debt; Debt Management; Sovereign Debt
• Subject: Investment efficiency ; Debt overhang ; Banking crises

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Popov, Alexander ; Barbiero, Francesca ; Wolski, Marcin
• Event: Veröffentlichung
• (who): European Central Bank (ECB)
• (where): Frankfurt a. M.
• (when): 2018

Further information

• DOI: doi:10.2866/234067
• Handle: http://hdl.handle.net/10419/208247
• Last update: 10.03.2025, 11:42 AM CET