Construct · 1 fields · 1 citations

overhang: a standalone construct

One name. One construct. A landmark on the map.

● anchor · a standalone construct Nearest construct by meaning·not indexed
overhang1 CONSTRUCTDebt overhangMYERS · 1977

A single standalone construct; nearby constructs are located against it in the Collider. Tap a field for its definition, unit, and measures.

Corporate finance

Existing debt deters new investment

Debt overhang is the situation in which a firm (or a country) already carries so much debt that it passes up profitable new investment, because much of the payoff would accrue to existing creditors rather than to the equity holders or taxpayers who must fund it. Myers' 1977 Determinants of corporate borrowing identified this underinvestment incentive as a cost of debt. The referent is a distortion of investment incentives created by a prior stock of debt, and it anchors analyses of corporate capital structure and of sovereign-debt restructuring.[1]

Unit
The profitable investment forgone because its returns would accrue to existing creditors
Recovery means
Not applicable
Measured by
Inferred from reduced investment at high leverage and from the sensitivity of investment to the debt burden

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Nearby constructs

option4 fields · 9 citationsjingle · one word, four constructscapital structure4 names · 6 citationsjangle · one leverage choice, rival theoriescapital2 fields · 3 citationsjingle · one word, two constructs

References

  1. Myers, S. C. (1977). Determinants of corporate borrowing. Journal of Financial Economics, 5(2), 147–175. https://doi.org/10.1016/0304-405X(77)90015-0

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