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...

The business cycle dynamics of firms' investment and debt maturity vary across the firm size and age distribution: Young and small firms have strongly pro-cyclical debt maturity and investment, old and large firms a-cyclical debt maturity and weakly pro-cyclical investment. This paper explores...

I study the business cycle dynamics of the maturity structure of the debt of U.S. non-financial firms. I document three facts: First, the aggregate share of long-term debt in total debt is pro-cyclical. Second, the long-term debt share of small firms has a higher standard deviation and...

I build a dynamic capital structure model that demonstrates how business-cycle variations in expected growth rates, economic uncertainty, and risk premia influence firms' financing and default policies. Countercyclical fluctuations in risk prices, default probabilities, and default losses arise...

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 impact of the concentration and complexity of the banking sector on firms' financing and investment behavior over the business cycle. We find that, after the late 1990s, while debt issuance remained procyclical for US firms of all sizes, equity issuance and liquidity accumulation...

This study theoretically examines under what circumstances economic cycles advance or deter corporate defaults. We find that an ongoing catastrophe dominates other macroeconomic conditions and forces corporate failures. In contrast, when a catastrophe is unlikely, a constant economy permits...

We develop a tractable model of strategic debt renegotiation in which businesses are sequentially interconnected through their liabilities. This financing structure, which we refer to as a "debt chain", gives rise to externalities, as a lender's willingness to provide concessions to his...

This paper extends Nolan and Thoenissen (2009), hence NT, model with an explicit financial intermediary that transfer funds from households to entrepreneurs subject to a well defined loan production function. The loan productivity shock is treated as the supply side financial disturbance....

I add a moral hazard problem between banks and depositors as in Gertler and Karadi (2009) to a DSGE model with a costly state verification problem between entrepreneurs and banks as in Bernanke et al. (1999) (BGG). This modification amplifies the response of the external finance premium and the...