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...

In a recent working paper, "An application of causal forest in corporate finance: How does financing affect investment?" Gulen, Jens, and Page, April 23 2020, (GJP) challenge the analysis and several conclusions of our paper, "How Does Financing Impact Investment? The Role of Debt Covenants,"...

We exploit an exogenous, universal increase in discount rates mandated by the Moving Ahead for Progress Act (MAP-21) to identify the impact of pension overhang on investment. We find that firms with large unfunded pension liabilities increase investment by 13% after the MAP-21 induced decrease...

We analyze how creditors' simultaneous debt and equity holdings affect firm investment policies. Firms with dual ownership are less likely to have capital expenditure restrictions in loan contracts and the relation varies in predicted ways with borrowers' monitoring needs and dual owners'...

Is bank financing compatible with innovation? We show that an exogenous enhancement in value of borrowers' patents, either through greater patent protection or creditor rights over collateral, results in cheaper loans. Using regression discontinuity design, we show while R\&D investment drops...