Debt, labor markets, and the creation and destruction of firms
Authors:听Almazan, A.,听De Motta, A., and Titman, S.ac 听
听Publication:听Journal of Financial Economics, Vol. 118, No. 3, 2015
Abstract:听
We analyze the financing and liquidation decisions of firms that face a labor market with search frictions. By inducing bankruptcy, debt can facilitate the process of creative destruction (i.e., the elimination of inefficient firms and the creation of new firms) but can also lead to excessive liquidation and unemployment in particular, during economic downturns. Within this setting, we examine policy interventions that influence the firms financing and liquidation choices. We consider the role of monetary policy, which can reduce debt burdens during economy-wide downturns, and tax policy, which can influence the incentives of firms to use debt financing.听
Read full article:听, December 2015
Feedback
For more information or if you would like to report an error, please web.desautels [at] mcgill.ca (subject: Website%20News%20Comments) (contact us).
