We investigate equilibrium debt dynamics for a firm that cannot commit to a future debt policy and is subject to a fixed restructuring cost. We formally characterize equilibria when the firm is not required to repurchase outstanding debt prior to issuing additional debt. For realistic values of...

The aim of this paper is to ascertain corporate investment reaction in bank-dependent companies in times of crisis. Our investigation covers the differences in corporate investment reaction due to the global financial crisis (GFC) of 2007-2009 and the COVID-19 crisis of 2020–2021. We utilized...

This paper examines whether investors react to consumption taxes. Despite the near global adoption of VAT policies, relatively little is known regarding the investor response to VAT changes. In an event-study setup, using a new dataset of daily equity returns and precise dates of tax policy...

Indian corporate bond market is gaining lot of focus in the recent past with a number of measures announced by the regulators the RBI and the SEBI as well as the initiatives taken by the stock exchanges to provide a dedicated debt trading segment. In this context, an attempt is made to study the...

This paper investigates whether and how economic policy uncertainty affects corporate debt maturity. Using a large firm-level dataset for four European countries, we find that an increase in economic policy uncertainty is significantly associated with a shortened debt maturity. Moreover, the...

We show that a policy rate cut lengthens corporate debt maturity. A 1 standard deviation (10 basis points, b.p.) expansionary interest rate shock raises the share of long-term debt by 87 b.p., explaining about 20% of its variation. Moreover, we show that only large, bond-issuing firms adjust. A...

We document issuance overpricing of corporate debt securities in China, which contrasts with underpricing of equity and debt securities in Western countries. The phenomenon in China is robust across subsamples of issuances with different credit ratings, maturities, issuer types, and issuing...

This paper analyses the implications of corporate indebtedness for investment following large economic shocks. The empirical analysis is based on a large Orbis-iBACH firm-level data set for euro area countries from 2005 to 2018. Our results suggest that investment of high-debt firms is...

The article analyzes the impact of debt maturity structure and other factors on investment decisions of enterprises listed on the Vietnam’s stock market from 2010 to 2019. Data used in this study are acquired from the financial statements of 558 enterprises listed on both the Ho Chi Minh and...

This paper presents principles that could guide the design of more targeted policy support and facilitate the restructuring of firms adversely impacted by the COVID-19 pandemic. To this end, the paper takes stock of vulnerabilities and risks in the enterprise sector and assesses countries'...

In 1825, France conditioned its grant of recognition to the new nation of Haiti on the payment of 150 million francs plus trade benefits. The payments were, at least in part, compensation for the losses that French plantation owners suffered, a key part of which was the loss of enslaved...

Implicit government guarantees in the Chinese bond market, which shaped investors’ belief in rigid payment, have been withdrawn after the first bond default, causing spillover effects on non-defaulted bonds. This study investigates the intra-regional spillover effects of the staggered first...

High-yield debt, including leveraged loans, is characterized by incurrence financial covenants, or "cov-lite" provisions. Unlike, traditional, maintenance covenants, incurrence covenants preserve equity control rights but trigger pre-specified restrictions on the borrower's actions once the...

Die Arbeit untersucht die Wiederherstellung der privaten deutschen Kreditwürdigkeit nach dem Zweiten Weltkrieg anhand eines Konstitutionsprozesses von Vertrauen im Zuge der Londoner Schuldenkonferenz. Im Mittelpunkt steht die These, dass die Bedeutung der deutschen Auslandsschuldenregelung...

This study investigates the effect of sharia firms on the cost of debt in the Indonesian market. We use OLS regression to examine the relationship by applying 1870 data observations of nonfinancial companies registered on the Indonesia Sharia Stock Index (ISSI) during 2012-2018. We found that...

This paper explores the effect of oil price fluctuations on the stock returns of U.S. oil firms using a strategy of identification through heteroskedasticity exploiting the 2020 oil crash. Results are twofold. First, we find that a decline in oil prices statistically significantly reduces stock...

In dynamic capital structure models with an investor break-even condition, the firm's Bellman equation may not generate a contraction mapping, so the standard existence and uniqueness conditions do not apply. First, we provide an example showing the problem in a classical trade-off model. The...

This paper investigates the cost of debt of parent and subsidiary firms on the US corporate bond market. Debt issued by subsidiary firms is economically relevant, as it represents 13% of the total US bond debt. I find that the bonds issued by non-financial subsidiary firms are related, both...

This paper examines ways to summarize the maturity structure of public debts using a small number of parameters. We compile a novel dataset of all promised future payments for US and UK government debt from every month since 1869, and more recently for Peru, Poland, Egypt, and Nigeria. We show...

We apply multiple machine learning (ML) methods to model loss given default (LGD) for corporate debt using a common dataset that is cross-sectional but collected over different time periods and shows much variation over time. We investigate the efficacy of three cross-validation (CV) schemes for...

UK debt restructuring is undergoing a period of immense change. Two developments in particular have contributed to this transformation. The first is legislative: the Corporate Insolvency and Governance Act 2020 (CIGA) introduced a number of powerful new tools into the armoury of financially...

This paper proposes a macro-banking model with corporate debt choice and investigates the impacts of bank capital regulation. Compared to non-banks, banks provide restructurable debt that resolves firm liquidations. Capital regulation corrects deposit insurance distortions but reduces bank debt...

With business leverage at record levels, the effects of corporate debt overhang on growth and investment have become a prominent concern. In this paper, we study the effects of corporate debt overhang based on long-run cross-country data covering the near- universe of modern business cycles. We...

We analyze the heterogeneous nature of corporate debt contracts, some focusing on liquidation values of discrete assets whereas others on going-concern values of the business. Using hand-collected data on firm attributes, we present several findings. First, firms on average have limited...

How do firms manage debt maturity in the presence of investment opportunities? I document empirically that US corporations lengthen their average maturity of debt when output and investment rates are larger. To explain these findings, I construct an economic model where firms dynamically choose...

This study details an investigation of the relationship between controlling shareholders’ share pledge and (a) firms’ financial leverage and (b) the cost of debt. Consistent with the literature suggesting that firms with controlling shareholders pledging their shares are associated with...

Private firm financing, given the far-reaching importance of non-publicly traded companies for global output and employment, is still a relatively underexplored area. Since the seminal work of Petersen and Rajan (1994), only a small branch of research into private firms' cost of debt has been...

This paper explores the effect of oil price fluctuations on the stock returns of U.S. oil firms using an identification strategy through heteroskedasticity, exploiting the 2020 oil price crash. The results are twofold. First, a decline in oil prices significantly reduces oil firms' stock...

Firms with debt overhang, measured as total borrowing to cash-flow, experience 2% slower asset growth during ordinary times and up to 3% slower growth during a crisis, compared to similar firms without debt overhang. These patterns extend to a firm's growth in employment and capital...

We study the impact of the COVID-19 recession on capital structure of publicly listed U.S. firms. Our estimates suggest leverage (Net Debt/Asset) decreased by 5.3 percentage points from the pre-shock mean of 19.6 percent, while debt maturity increased moderately. This de-leveraging effect is...