Philipp-Bastian Brutscher, Jonas Heipertz, Christopher Hols, 23 April 2018

Despite an extensive literature examining the optimal financing mix, little work exists on firms’ preferences over specific debt financing characteristics. This column uses experimental data from Europe to analyse the link between different external financing characteristics and investment decisions. The findings suggest that modest improvements in financing terms can more than double the probability of investment. Investment decisions are particularly sensitive to interest rates and collateral requirements.

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