Economics, Econometrics and Finance
3 years ago

Secured debt limits drive investment decisions, reshaping financial landscapes.

Contributions to finance and accounting
Borrowing Constraints, Debt Dynamics and Investment Decisions
Umberto Sagliaschi, Roberto Savona

Paper Summary

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The article discusses how companies make decisions about borrowing money and investing in projects. It focuses on a type of debt that is secured by assets, like a house securing a mortgage. This type of debt limits how much a company can borrow based on the value of its assets. Unlike unsecured debt, where a company borrows based on its future cash flow, secured debt is tied to the size of the company's balance sheet.