MSRM Professor Holger Mueller’s research on corporate debt was featured in an article by Bloomberg Business, titled “Your Company’s Big Appetite For Debt May Be Dangerous To Your Job.” The article discusses the conclusions made by Prof. Mueller and Xavier Giroud of MIT in their recent research on firm leverage and unemployment during the great recession:
“When faced with plunging household demand, leveraged firms ‘do not (or cannot) raise additional external finance’ they write in the paper. ‘Instead, high-leverage firms reduce employment, close down establishments, and cut back on investment.’
‘It’s all about who can weather the storm,’ Mueller said, ‘and that requires money.’ Firms with strong balance sheets were still able to raise cash during the recession. Firms with weak balance sheets had limited financing options and had to cut staff.”
To read the article on Bloomberg Business, please click here.
To read Professor Mueller’s research paper, click here.