Firm Expectations and Debt Growth

Eiblmeier, Sebastian (2025): Firm Expectations and Debt Growth.

Abstract

This paper explores the link between business outlook and corporate debt. Previous research has found business outlook to be a key determinant of firm investment and firm investment to be a key reason for firms to take on debt. This implies a connection between outlook and debt. Indeed, panel regressions show a tight connection between business sentiment and firms' debt growth. A mediation analysis reveals that most of this effect runs through inventories and accounts receivable, whereas for investment only a smaller effect can be found.

• Item Type: MPRA Paper
• Language: English
• Keywords: Firm expectations, corporate finance, panel regression, mediation analysis.
• Subjects: C - Mathematical and Quantitative Methods > C2 - Single Equation Models ; Single Variables > C23 - Panel Data Models ; Spatio-temporal Models; D - Microeconomics > D2 - Production and Organizations > D22 - Firm Behavior: Empirical Analysis; D - Microeconomics > D8 - Information, Knowledge, and Uncertainty > D84 - Expectations ; Speculations; D - Microeconomics > D9 - Intertemporal Choice > D92 - Intertemporal Firm Choice, Investment, Capacity, and Financing; G - Financial Economics > G3 - Corporate Finance and Governance > G31 - Capital Budgeting ; Fixed Investment and Inventory Studies ; Capacity

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