Corporate Balance Sheet Restructuring and Investment in the Euro Area
Author: Mr.Albert Jaeger
Publisher: International Monetary Fund
Published: 2003-06-01
Total Pages: 24
ISBN-13: 145185403X
DOWNLOAD EBOOK →The recent boom-bust cycle in the euro area's equity valuations has left nonfinancial corporations saddled with a legacy of high debt or leverage. Models of corporate investment behavior based on imperfect capital markets predict that highly leveraged balance sheets can act as a brake on investment spending. The paper's empirical analysis suggests that leverage effects on corporate investment can be substantial and persistent, particularly if leverage exceeds threshold values.