Firms' Rollover Risk, Capital Structure and Unequal Exposure to Aggregate Shocks
In: Journal of Corporate Finance, Band 80
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In: Journal of Corporate Finance, Band 80
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In: IMF Working Paper No. 2021/265
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In: IMF Working Paper No. 18/11
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Using data for advanced and emerging economies, we show that there is a negative correlation between public debt and corporate investment. Industry-level regressions show that high levels of government debt are particularly damaging for industries that need more external financial resources. Firm-level regressions show that government debt increases the sensitivity of corporate investment to cash flow. These results indicate that the relationship between public debt and investment is likely to be causal and that public debt crowds out corporate investment by tightening credit constraints.
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In: CEPR Discussion Paper No. DP12931
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In: IMF Working Paper No. 2023/013
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In: IMF Working Paper No. 2023/157
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In: European journal of political economy, Band 71, S. 102073
ISSN: 1873-5703
In: IMF Working Paper No. 2021/049
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This paper examines whether political connections ease financial constraints faced by firms. Using firm-level data from six Central and Eastern European economies, the paper shows that politically connected firms: (i) have high levels of leverage, (ii) have low levels of profitability, (iii) are less capitalized, (iv) have low marginal productivity of capital, and (v) do not invest more than unconnected firms. Next, the paper shows that connected firms borrow more because they have easier access to credit and that political connections lead to a misallocation of capital. The results are consistent with the idea that political connections distort capital allocation and may have welfare costs.
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In: CEPR Discussion Paper No. DP14126
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In: IMF Working Paper No. 19/288
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