We investigate how debt financing responds to exposure to long-lived and temporary cash flow shocks. We identify these shocks using filtering methods that we demonstrate are highly effective for corporate finance data using Monte-Carlo simulations. The long-lived and temporary shocks we identify...

This paper examines how product market threats shape the use of performance pricing in loan contracts. Loan contracting faces a trade-off between financial markets and product markets: while using contractual terms that are linked to borrower performance -- such as performance pricing --...