The Aggregate Consequences of Default Risk: Evidence from Firm-level Data
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Authors
Besley, T.
Roland, I.
Van Reenen, J.
Abstract
This paper studies the implications of perceived default risk for aggregate output and productivity. Using a model of credit contracts with moral hazard, we show that a firm’s probability of default is a sufficient statistic for capital allocation. The th
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Keywords
productivity, default risk, credit frictions, misallocation
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Faculty of Economics, University of Cambridge