1 option
Pledgeability, Industry Liquidity, and Financing Cycles / Douglas W. Diamond, Yunzhi Hu, Raghuram G. Rajan.
- Format:
- Book
- Author/Creator:
- Diamond, Douglas W.
- Series:
- Working Paper Series (National Bureau of Economic Research) no. w23055.
- NBER working paper series no. w23055
- Language:
- English
- Physical Description:
- 1 online resource: illustrations (black and white);
- Place of Publication:
- Cambridge, Mass. National Bureau of Economic Research 2017.
- Summary:
- Why do firms choose high debt when they anticipate high valuations, and underperform subsequently? We propose a theory of financing cycles where the importance of creditors' control rights over cash flows ("pledgeability") varies with industry liquidity. The market allows firms take on more debt when they anticipate higher future liquidity. However, both high anticipated liquidity and the resulting high debt limit their incentives to enhance pledgeability. This has prolonged adverse effects in a downturn. Because these effects are hard to contract upon, higher anticipated liquidity can also reduce a firm's current access to finance.
- Notes:
- Print version record
- January 2017.
The Penn Libraries is committed to describing library materials using current, accurate, and responsible language. If you discover outdated or inaccurate language, please fill out this feedback form to report it and suggest alternative language.