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Working Paper
Debt Flexibility
Bidder, Rhys M.; Crouzet, Nicolas; Jacobson, Margaret M.; Siemer, Michael (2023-11-29)
This paper documents new facts on the modification of bank loans using FR Y-14Q regulatory data on C&I loans. We find that loan-level modifications of key contractual terms, such as interest and maturity, occur at least once for 41% of loans. Cross sectional differences in modifications are substantial and amplified by borrower distress. Relative to single-lender loans, syndicated loans are 1.5 times more likely to be modified and interest rate changes are twice as likely. Our findings call into question whether 1) creditor dispersion makes loan modifications more challenging and 2) ...
Finance and Economics Discussion Series , Paper 2023-076

Working Paper
A Macroeconomic Model with Financial Panics
Gertler, Mark; Kiyotaki, Nobuhiro; Prestipino, Andrea (2017-12-15)
This paper incorporates banks and banking panics within a conventional macroeconomic framework to analyze the dynamics of a financial crisis of the kind recently experienced. We are particularly interested in characterizing the sudden and discrete nature of the banking panics as well as the circumstances that makes an economy vulnerable to such panics in some instances but not in others. Having a conventional macroeconomic model allows us to study the channels by which the crisis affects real activity and the effects of policies in containing crises.
International Finance Discussion Papers , Paper 1219

Working Paper
Who is screened out of social insurance programs by entry barriers? Evidence from consumer bankruptcies
Scholnick, Barry; Mikhed, Vyacheslav (2015-10-22)
Entry barriers into social insurance programs will be effective screening devices if they cause only those individuals receiving higher benefits from a program to participate in that program. We find evidence for this by using plausibly exogenous variations in travel-related entry costs into the Canadian consumer bankruptcy system. Using detailed balance sheet and travel data, we find that higher travel-related entry costs reduce bankruptcies from individuals with lower financial benefits of bankruptcy (unsecured debt discharged, minus secured assets forgone). When compared across filers, ...
Working Papers , Paper 15-40

Working Paper
Sectoral Loan Concentration and Bank Performance (2001-2014)
Regehr, Kristen; Sengupta, Rajdeep (2016-11-01)
Sectoral loan concentration is an important factor in bank performance. We develop a measure of sectoral loan concentration and study how community bank performance and the size-performance relationship vary with loan concentration and changes in loan concentration. The size-profitability relationship varies with concentration in the residential real-estate (RRE) sector. Higher RRE concentration is associated with lower returns especially for larger community banks?banks with assets totaling a billion or more. Concentration in other sectors, such as agriculture and commercial real estate ...
Research Working Paper , Paper RWP 16-13

Working Paper
Bankruptcy and delinquency in a model of unsecured debt
Athreya, Kartik B.; Young, Eric; Sanchez, Juan M.; Tam, Xuan S. (2012)
This paper documents and interprets two facts central to the dynamics of informal default or ?delinquency? on unsecured consumer debt. First, delinquency does not mean a persistent cessation of payment. In particular, we observe that for individuals 60 to 90 days late on payments, 85% make payments during the next quarter that allow them to avoid entering more severe delinquency. Second, many in delinquency (40%) have smaller debt obligations one quarter later. To understand these facts, we develop a theoretically and institutionally plausible model of debt delinquency and bankruptcy. Our ...
Working Papers , Paper 2012-042

Working Paper
Reorganization or Liquidation: Bankruptcy Choice and Firm Dynamics
Corbae, Dean; D'Erasmo, Pablo (2020-07-28)
In this paper, we ask how bankruptcy law affects the financial decisions of corporations and its implications for firm dynamics. According to current U.S. law, firms have two bankruptcy options: Chapter 7 liquidation and Chapter 11 reorganization. Using Compustat data, we first document capital structure and investment decisions of non-bankrupt, Chapter 11, and Chapter 7 firms. Using those data moments, we then estimate parameters of a general equilibrium firm dynamics model with endogenous entry and exit to include both bankruptcy options. Finally, we evaluate a bankruptcy policy change ...
Working Papers , Paper 769

Report
Zombies at Large? Corporate Debt Overhang and the Macroeconomy
Jordà, Òscar; Kornejew, Martin; Schularick, Moritz; Taylor, Alan M. (2020-12-01)
With business leverage at record levels, the effects of corporate debt overhang on growth and investment have become a prominent concern. In this paper, we study the effects of corporate debt overhang based on long-run cross-country data covering the near-universe of modern business cycles. We show that business credit booms typically do not leave a lasting imprint on the macroeconomy. Quantile local projections indicate that business credit booms do not affect the economy’s tail risks either. Yet in line with theory, we find that the economic costs of corporate debt booms rise when ...
Staff Reports , Paper 951

Journal Article
Why bail-in? And how!
Sommer, Joseph H. (2014-12)
All men are created equal, but all liabilities are not. Some liabilities are more equal than others. These "financial liabilities" are products of financial firms. These products shift risk (insurance or derivatives) or provide liquidity (bank deposits or repurchase agreements). Since these liabilities have an independent value as products, they are worth more than their net present value. The value of a financial firm, then, depends on its liability structure. These special liabilities therefore affect insolvency law. Most financial firms are governed by special insolvency law; those ...
Economic Policy Review , Issue Dec , Pages 207-228

Working Paper
Firm Exit and Liquidity: Evidence from the Great Recession
Leibovici, Fernando; Wiczer, David (2023-05)
This paper studies the role of credit constraints in accounting for the dynamics of firm exit during the Great Recession. We present novel firm-level evidence on the role of credit constraints on exit behavior during the Great Recession. Firms in financial distress, with tighter access to credit, are more likely to default than firms with more access to credit. This difference widened substantially in the Great Recession while, in contrast, default rates did not vary much by size, age, or productivity. We identify conditions under which standard models of firms subject to financial frictions ...
Working Papers , Paper 2023-011

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