This paper develops a model with the novel feature that firms can renegotiate debt both in and outside distress. We show that this feature is crucial for debt renegotiation models to explain corporate policies and debt prices. Specifically, the model reflects empirical credit spread patterns,...

We study the relationship between corporate debt, corporate risk and firm-level investment, using a sample of 25,000 listed companies across 47 countries over the last two decades. We find higher leverage reduces investment but show the effect varies with risk, as measured by firm time-varying...

This paper investigates the link between corporate debt and investment for a group of five peripheral euro area countries. Using firm-level data from 2005-2014, we postulate a non-linear corporate leverage-investment relationship and derive thresholds beyond which leverage has a negative and...

I study the empirical importance of debt overhang using a unique dataset on resource extraction firms, which provides ex ante measures of investment opportunities and important variation in the terms of a firm's obligations. In particular, unsecured reclamation liabilities create overhang that...

We quantify the role of financial factors behind the sluggish post-crisis performance of European firms. We use a firm-bank-sovereign matched database to identify separate roles for firm and bank balance sheet weaknesses arising from changes in sovereign risk and aggregate demand conditions. We...

Does corporate debt overhang affect investment over the medium term? To better uncover this association, I argue that we need to measure debt overhang with a concept of debt accumulation or debt boom, and to combine leverage with liquid assets to capture financial constraints. Using firm-level...

Does corporate debt overhang affect investment over the medium term? To uncover this association, I measure debt overhang with a concept of debt accumulation or debt boom, and combine leverage with liquid assets to capture financial constraints. Using a large US firm-level panel over 1985...

This paper investigates the effect of investment opportunities, audit quality and debt maturity on the interest paid by all-equity firms. Debt holders are likely to charge higher interest to price-protect themselves because of the under-investment and asset substitution problems. All-equity...

We quantify the role of financial factors behind the sluggish post-crisis performance of European firms. We use a firm-bank-sovereign matched database to identify separate roles for firm and bank balance sheet weaknesses arising from changes in sovereign risk and aggregate demand conditions. We...

This paper examines the impact of the New Economy on the relationship between corporate debt policy and firm investment opportunities. One distinctive feature of new economy firms is their high level of investment opportunities. We study whether the impact of investment opportunities on...