G2TT
来源类型Discussion paper
规范类型论文
来源IDDP15238
DP15238 Doubling Down on Debt: Limited Liability as a Financial Friction
Jesse Perla; Carolin Pflueger; Michal Szkup
发表日期2020-08-31
出版年2020
语种英语
摘要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 ability to issue new claims to the bankruptcy value of the firm. In a repeated version of the model, we show that the inability to commit to not double-sell cash flows leads to heterogeneous investment distortions, where high leverage firms tend to overinvest but low leverage firms tend to underinvest. Permitting equity payouts financed by new debt mitigates overinvestment for high leverage firms, but raises bankruptcy rates and exacerbates low leverage firms' tendency to underinvest---as the anticipation of equity payouts from future debt raises their cost of debt issuance. Finally, we provide empirical evidence consistent with the model.
主题Financial Economics ; Macroeconomics and Growth ; Monetary Economics and Fluctuations
关键词Leverage Debt overhang Overinvestment Underinvestment Equity payout restrictions
URLhttps://cepr.org/publications/dp15238
来源智库Centre for Economic Policy Research (United Kingdom)
资源类型智库出版物
条目标识符http://119.78.100.153/handle/2XGU8XDN/544213
推荐引用方式
GB/T 7714
Jesse Perla,Carolin Pflueger,Michal Szkup. DP15238 Doubling Down on Debt: Limited Liability as a Financial Friction. 2020.
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