A rapid increase in household debt is undeniably a main concern among policymakers. Studies indicating the damaging effect of rapid rise in household debt towards economic growth attracted many researchers to determine its reasons. The risk from high household debt is not only applicable to...

We investigate how a combination of limited liability and preexisting debt distort firms' investment and equity payout decisions. We show that equity holders have incentives to "double-sell" cash flows in default, leading to overinvestment, provided that the firm has preexisting debt and the...

The Chinese Ministry of Environmental Protection has enacted an environmental policy that restricts the investment activities of heavily polluting firms by increasing their financial constraints. In this paper, we examine the impact of environmental labeling on firms’ financial constraints. We...

Using loan-level data covering two-thirds of all corporate loans from U.S. banks, we document that SMEs (i) obtain much shorter maturity credit lines than large firms; (ii) have less active maturity management and therefore frequently have expiring credit; (iii) post more collateral on both...

We introduce the concept of a financial stability real interest rate using a macroeconomic banking model with an occasionally binding financing constraint, as in Gertler and Kiyotaki (2010). The financial stability interest rate, r**, is the threshold interest rate that triggers the constraint...