Corporate Balance Sheet Restructuring and Investment in the Euro Area

The recent boom-bust cycle in the euro area's equity valuations has left nonfinancial corporations saddled with a legacy of high debt or leverage. Models of corporate investment behavior based on imperfect capital markets predict that highly leveraged balance sheets can act as a brake on investment spending. The paper's empirical analysis suggests that leverage effects on corporate investment can be substantial and persistent, particularly if leverage exceeds threshold values.

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Year of publication:	2003-06-01
Authors:	Jaeger, Albert
Institutions:	International Monetary Fund (IMF)
Subject:	External financing \| Forecasting models \| capital stock \| financial assets \| cost of capital \| stock market \| capital markets \| financial structure \| capital ratio \| capital spending \| financial corporations \| capital market \| capital structure \| equity ratio \| equity financing \| equity valuation \| capital goods \| imperfect capital markets \| capital budgeting \| valuation of capital \| international capital \| moral hazard \| financial structures \| stock prices \| equity investments \| capital market imperfections \| cash flow \| hedges \| financial sector \| financial intermediation \| hedge \| stock markets \| inflation rate \| equity risk premium \| bear markets \| equity market \| equity markets \| portfolio investment \| stock market bubble \| financial market

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Extent:	application/pdf
Series:	IMF Working Papers.
Type of publication:	Book / Working Paper
Notes:	The text is part of a series IMF Working Papers Number 03/117 2 pages long
Source:	RePEc - Research Papers in Economics

Persistent link: https://www.econbiz.de/10005605417