This study focuses on the impact of the 2001 recession as well as the subsequent expansion on U.S. trade (i.e., retail and wholesale) firms' short-term assets and liabilities. The paper also analyzes the differential effects on long-term debt and cash flow levels between retail and wholesale...

Using firm-level administrative tax data on the 43% of business liabilities in the United States tied to privately held firms, we document dramatic reductions in leverage since the Great Recession. Leverage for the average private firm fell fifteen percent between 2004 and 2018. In contrast,...

We examine how legal creditor rights are related to debt financing and corporate investment over the business cycle. Using firm-level data from 40 countries, we find that creditor rights are associated with greater debt financing and investment during economic downturns, but creditor rights have...

Firm-level investment paths are commonly characterised by periods of low or zero investment punctuated by large investment ‘spikes’. We document that such spikes are important for understanding firm and aggregate level investment in the UK. We show that annual variation in aggregate...

Using a dynamic model of financing, investment, and macroeconomic risk, we investigate when firms sell assets to fund investments (financing asset sales) across the business cycle. Equity financed investment transfers wealth from equity to debt because asset volatility declines and earnings...

This paper investigates investment and disinvestment decisions when an investor finances debt to fund the lump-sum cost at the time of investment. The study examines investment timing decisions in a frictionless financial market. By extending the model presented in Dixit (1989), this paper...

We examine the joint optimization of financial leverage and irreversible capacity investment in a real options framework with risky debt and endogenous interest costs. Higher capacity, ceteris paribus, increases operating leverage and default probability, but lowers ex post adjustment costs and...

This paper examines how contingent convertible bonds (CoCos) outstanding impact on expansion investment under exogenous and endogenous conversion threshold. We provide a relatively formal method to price general corporate securities. We find that under an exogenous conversion threshold, there is...

We show how to calculate the after-tax value of real options, including the value of interest tax shields on debt supported or displaced by the options. An option's “debt capacity” can be calculated from the adjusted present value (APV) and target debt ratio for the underlying asset, the...