investment, and that this in turn is impeding growth and the recovery. High levels of debt can depress spending and investment … through several channels. This Commentary explains one of them—debt overhang can cause firms to underinvest—and points to ways …

The buildup of debt in the late 1990s has raised concerns about the U.S. nonfinancial corporate sector's health and its …

We study the macroeconomic implications of the debt overhang distortion. In our model, the distortion arises because … investment is non-contractible—when a firm borrows funds, the debt contract cannot specify or depend on the firm’s future level … of investment. After the debt contract is signed, the probability that the firm will default on its debt obligation acts …

The authors examine a firm's choice between public and private debt in a model where the firm's financing source …, debt financing leads to excessively risky product market strategies (as in Brander and Lewis' (1986) Cournot oligopoly with … debt). Lender control through restrictive covenants--which is characteristic of private debt--can commit the firm to reduce …