Snow and Leverage
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Giroud_Snow and.pdf
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357.72 KB
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Author(s)
Giroud, Xavier
Mueller, Holger M.
Stomper, Alex
Westerkamp, Arne
Date Issued
November 2011
Journal
Review of Financial Studies
Publisher
Oxford University Press
Citation
Giroud, Xavier, Holger M. Mueller, Alex Stomper, and Arne Westerkamp. “Snow and Leverage.” Review of Financial Studies 25, no. 3 (March 2012): 680–710.
Version
Original manuscript
Abstract
Based on a sample of highly leveraged Austrian ski hotels undergoing debt restructurings, we show that reducing a debt overhang leads to a significant improvement in operating performance. Changes in leverage in the debt restructurings are instrumented with Unexpected Snow, which captures the extent to which a ski hotel experienced unusually good or bad snow conditions prior to the debt restructuring. Unexpected Snow provides lending banks with the counterfactual of what would have been the ski hotel's operating performance in the absence of strategic default, allowing them to distinguish between ski hotels that are in distress due to negative demand shocks (“liquidity defaulters”) and those that are in distress due to debt overhang (“strategic defaulters”).
MIT Department
Sloan School of Management
Terms of Use
Creative Commons Attribution-Noncommercial-Share Alike
Persistent DSpace Link
DOI of Published Version
https://doi.org/10.1093/rfs/hhr113
