Misallocation of debt and aggregate productivity

Document Type

Article

Publication Title

Journal of Corporate Finance

Abstract

We propose an accounting framework that maps the dispersion of borrowing costs along the debt maturity structure to the misallocation of productive resources. Specifically, we decompose the effects of credit misallocation into two distinct channels: limited access to debt finance (the scale effect) and distortion in the composition of debt across maturities (the composition effect). Our estimates suggest that an efficient allocation of debt could increase TFP by approximately 14.4% in the US manufacturing sector, of which roughly 10% is attributable to the composition of debt. Reducing inefficiencies in the composition of debt would result in TFP losses due to access and composition of factor inputs being reduced by 9.7% and 0.4%, respectively.

Publication Date

28-9-2023

Publisher

Elsevier

Volume

Vol.83

Link to Full Text
Request Access

Share

COinS