Real Effects of Rollover Risk: Evidence from Hotels in Crisis / Anthony A. DeFusco, Charles G. Nathanson, Michael Reher.

Format:

Book

Author/Creator:

DeFusco, Anthony A.

Contributor:

National Bureau of Economic Research.

Nathanson, Charles G.

Reher, Michael.

Series:

Working Paper Series (National Bureau of Economic Research) no. w31764.

NBER working paper series no. w31764

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2023.

Summary:

We show how firms scheduled to roll over debt in a crisis strategically reduce operations, regardless of their liquidity constraints. Our research design utilizes contractual features of commercial mortgages that generate as-good-as-random variation in whether debt is scheduled to mature during a crisis or just before. Once the crisis begins, borrowers cut labor expenses and produce less output at properties collateralizing loans coming due during the crisis, especially high-leverage loans. These effects hold with owner fixed-effects, consistent with strategic default and not liquidity constraints as the dominant mechanism. A parsimonious model of debt overhang with rollover risk rationalizes these results.

Notes:

Print version record

October 2023.