• Media type: E-Book
  • Title: Real Effects of Financial Distress : The Role of Heterogeneity
  • Contributor: Buera, Francisco J. [Author]; Karmakar, Sudipto [Other]
  • imprint: [S.l.]: SSRN, [2018]
  • Published in: Banco de Portugal Working Paper ; No. 6
  • Extent: 1 Online-Ressource (87 p)
  • Language: English
  • DOI: 10.2139/ssrn.2997983
  • Identifier:
  • Keywords: 2010-2012 ; Verbindlichkeiten ; Fälligkeit ; Investition ; Schuldenkrise ; Schock ; Portugal
  • Origination:
  • Footnote: Nach Informationen von SSRN wurde die ursprüngliche Fassung des Dokuments July 6, 2017 erstellt
  • Description: What are the heterogeneous effects of financial shocks on firms' behavior? This paper evaluates and answers this question from both an empirical and a theoretical perspective. Using micro data from Portugal during the sovereign debt crisis, starting in 2010, we document that highly leveraged firms and firms that had a larger share of short-term debt on their balance sheets contracted more in the aftermath of a financial shock. We use a standard model to analyze the conditions under which leverage and debt maturity determine the sensitivity of firms' investment decisions to financial shocks. We show that the presence of long-term investment projects and frictions to the issuance of long-term debt are needed for the model to rationalize the empirical findings. We conclude that the differential responses of firms to a financial shock do not provide unambiguous information to identify these shocks. Rather, we argue that this information should be use to test for the relevance of important model assumptions
  • Access State: Open Access