Whether to invest in process development that can reduce the unit cost and thereby raise future profits or to conserve cash and reduce the likelihood of bankruptcy is a key concern faced by many startups firms that have taken on debt. We explore this concern by examining the production quantity...

This paper examines how good borrowers use the design of performance sensitive debt contracts to alleviate financial constraints. I show that borrowers use a convex pricing grid (i.e., a contract where the increase in the loan spread following a decline in performance exceeds the decrease in the...

We analyze the relation between different forms of debt financing at the firm's start-up and subsequent firm outcomes. We distinguish between business debt, obtained in the name of the firm, and personal debt, obtained in the name of the firm's owner and used to finance the start-up firm....

We study the leverage of U.S. firms over their life cycles and the connection between firm leverage, firm growth, and aggregate shocks. We construct a new dataset that combines private and public firms’ balance sheets with firm-level data from U.S. Census Bureau’s Longitudinal Business...

This paper studies how variations in tax rates and profitability affect the (unconditional) quantiles of the distribution of the leverage of European foreign owned subsidiaries in the presence of unobserved company characteristics, possibly correlated with their observable dimensions. To achieve...

Existing theories of a firm's optimal capital structure seem to fail in explaining why many healthy and profitable firms rely heavily on equity financing, even though benefits associated with debt (like tax shields) appear to be high and the bankruptcy risk low. This holds in particular for...