MICROECONOMIC

Extra Credit-Microeconomic

Extra Credit-Microeconomic

While credit is essential for investment, innovation and economic growth, there are risks related to excessive indebtedness in the corporate sector in the form of increased likelihood of financial distress and bankruptcy. The microeconomic implications of high leverage and provides an innovative firm-level approach to endogenously identify the threshold leverage beyond which corporate indebtedness becomes excessive.

While credit is essential for investment, innovation and economic growth, the current economic crisis has highlighted the risks of lending booms and excessive indebtedness around the world. Economists have long recognised that financial conditions in the private sector could have a powerful effect on ...