Debt overhang, credit demand and financial conditions
| Autor: | Isabel Argimón, Irene Roibás |
|---|---|
| Rok vydání: | 2023 |
| Zdroj: | Documentos de Trabajo. |
| ISSN: | 1579-8666 2004-2019 |
| Popis: | The empirical literature on the debt overhang hypothesis has estimated the relationship between investment and leverage at the firm level, which does not allow to disentangle between a firm’s decision not to invest as it is highly indebted and its ability to obtain the necessary resources. Using annual Spanish credit data from the Central Credit Register and non-financial corporations’ annual accounts from the lntegrated Central Balance Sheet Data Office Survey for the period 2004-2019, we study the impact of corporate debt on non-financial firms’ demand for bank loans, as a proxy for their willingness to invest. We find a negative relationship between firms’ leverage and demand for bank credit, thus supporting the debt overhang hypothesis. We then study whether such relationship is affected by financial conditions and find that a reduction in short-term interest rates mitigates the effect of firms’ leverage on demand for credit. |
| Databáze: | OpenAIRE |
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