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Is debt overhang causing firms to underinvest?

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Author Info

  • Filippo Occhino

Abstract

Many economists have suggested that the weakness of corporate balance sheets is constraining business spending and investment, and that this in turn is impeding growth and the recovery. High levels of debt can depress spending and investment through several channels. This Commentary explains one of them—debt overhang can cause firms to underinvest—and points to ways in which this effect might be inhibiting the recovery.

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File URL: http://www.clevelandfed.org/research/commentary/2010/2010-7.pdf
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Bibliographic Info

Article provided by Federal Reserve Bank of Cleveland in its journal Economic Commentary.

Volume (Year): (2010)
Issue (Month): Jul ()
Pages:

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Handle: RePEc:fip:fedcec:y:2010:i:jul20:n:2010-7

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Keywords: Corporations - Finance ; Debt;

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Cited by:
  1. Yan Liu & Christoph B. Rosenberg, 2013. "Dealing with Private Debt Distress in the Wake of the European Financial Crisis A Review of the Economics and Legal Toolbox," IMF Working Papers 13/44, International Monetary Fund.
  2. Satyajit Chatterjee, 2013. "Debt overhang: why recovery from a financial crisis can be slow," Business Review, Federal Reserve Bank of Philadelphia, issue Q2, pages 1-9.
  3. George M. von Furstenberg, 2011. "Concocting Marketable Cocos," Working Papers 222011, Hong Kong Institute for Monetary Research.

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