I analyze the repayment decisions of firms with multiple loans that, for liquidity constraints or strategic reasons, stop making payments in some but not all their loans. Using a sample of commercial loans from Colombia over the period 2002:03 - 2012:06, I find that firms are less likely to stop...

The financial crisis brought to light weakness in the assessments of risks and vulnerabilities in banks. Consequently, an insight into how the ownership structure of a bank affects investment decisions, performance and ultimately insolvency risk - the focus of this paper - is crucial. Our...

This study explores developments in corporate creditworthiness before and after ownership events. We utilize the Blockholders database recently produced by Dlugosz, Fahlenbrach, Gompers, and Metrick (2006) and discover that ownership-construction is generally associated with prior and post...

This paper examines the effect of ownership structure of a controlling shareholder on the financial constraints of non-financial firms in 22 economies for the 1982-2009 period. We find that the overinvestment propensity of a controlling shareholder becomes less severe with an increase in...

I examine large shareholders' externalities on other claim holders when firms are financially distressed. To this end, I develop a tractable dynamic model of the interplay between these blockholders and regular equity holders. Blockholders' information acquisition and investment decisions play a...

While previous work suggests two competing explanations for the effect of labor market regulation on firms' demand for debt, our results reconcile both the “strategic use of debt” and “financial flexibility” view. Exploiting staggered changes to labor laws in 28 OECD countries, we find...

While previous work suggests two competing explanations for the effect of labor market regulation on firms' demand for debt, our results reconcile both the “strategic use of debt” and “financial flexibility” view. Exploiting staggered changes to labor laws in 28 OECD countries, we find...

A number of studies have examined the effect of public and private ownership on the cost of debt and conclude that the cost of debt of privately owned firms is higher, driven mainly by the poorer information environment in which these firms operate. We extend this strand of research in two ways....

Using a dynamic model of strategic bargaining between equity and debt holders following default, we analyze the impact of shareholder bargaining power on the investment effects of debt overhang. Our empirical tests utilize a new measure of debt overhang wedge based on default probabilities...

We examine the role private equity (PE) firms play in the resolution of financial distress using a sample of 2,151 firms that borrow in the leveraged loan market between 1997 and 2010. Controlling for leverage, PE-backed firms are no more likely to default than other leveraged loan borrowers....