On the Investment Sensitivity of Debt under Uncertainty
Baum, Christopher, Mustafa Caglayan, and Oleksandr Talavera. “On the Investment Sensitivity of Debt under Uncertainty”. Boston College Working Papers in Economics 686, 2008.
We investigate the impact of debt on a panel of U.S. manufacturing firms' capital investment behavior as the underlying firm-specific and macroeconomic uncertainty changes. Our estimates show that the influence of leverage on capital investment may be stimulating or mitigating depending on the effects of uncertainty.