Pledgeability, Industry Liquidity, and Financing Cycles

• 成果类型: Article
• 署名作者: Diamond, Douglas W.; Hu, Yunzhi; Rajan, Raghuram G.
• 署名单位: National Bureau of Economic Research; University of North Carolina; University of North Carolina Chapel Hill
• 刊物名称: JOURNAL OF FINANCE
• ISSN/ISSBN: 0022-1082
• DOI: 10.1111/jofi.12831
• 发表日期: 2020
• 页码: 419-461
• 关键词: capital reallocation; fire sales; debt; leverage; prices

摘要

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.