Corporate Balance Sheet Restructuring and Investment in the Euro Area

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.
Publication date: June 2003
ISBN: 9781451854039
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Topics covered in this book

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Finance , Finance , Corporate investment and financing , business cycle , capital stock , financial assets , cost of capital , stock market , capital markets , Prices , Business Fluctuations , and Cycles: Forecasting and Simulation

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