Citation

Discussion Paper Details

Please find the details for DP8148 in an easy to copy and paste format below:

Full Details   |   Bibliographic Reference

Full Details

Title: Snow and Leverage

Author(s): Xavier Giroud, Holger M Mueller, Alexander Stomper and Arne Westerkamp

Publication Date: December 2010

Keyword(s): Debt Forgiveness, Debt Overhang, Debt Renegotiation and Debt Restructuring

Programme Area(s): Financial Economics

Abstract: This paper examines whether reducing a debt overhang improves borrowers' operating performance using a sample of distressed and highly overleveraged Austrian ski hotels undergoing debt restructurings. The vast majority of the ski hotels experience substantial debt forgiveness, resulting in reductions in leverage of about 23% on average. These reductions in leverage, in turn, bring about statistically and economically significant improvements in operating performance of about 28% on average. Changes in leverage during the debt restructurings are instrumented with the level of snow in the years prior to the debt restructurings. The effect of snow is both statistically and economically significant: a one-standard deviation increase in snow is associated with a reduction in leverage of about 23%.

For full details and related downloads, please visit: https://cepr.org/active/publications/discussion_papers/dp.php?dpno=8148

Bibliographic Reference

Giroud, X, Mueller, H, Stomper, A and Westerkamp, A. 2010. 'Snow and Leverage'. London, Centre for Economic Policy Research. https://cepr.org/active/publications/discussion_papers/dp.php?dpno=8148