Anthony DeFusco – Northwestern (Kellogg)

Please note Anthony’s Seminar will take place at 2:30 PM to 4:00 PM in Rouss Robertson Hall 227.

Anthony will present the following paper, available here.

Real Effects of Rollover Risk: Evidence from Hotels in Crisis with Charles Nathanson and Michael Reher

Abstract: We show how firms scheduled to roll over debt in a crisis strategically reduce operations, regardless of their liquidity constraints. Our research design utilizes contractual features of commercial mortgages that generate as-good-as-random variation in whether debt is scheduled to mature during a crisis or just before. Once the crisis begins, borrowers cut labor expenses and produce less output at properties collateralizing loans coming due during the crisis, especially high-leverage loans. These effects hold with owner fixed-effects, consistent with strategic default and not liquidity constraints as the dominant mechanism. A parsimonious model of debt overhang with rollover risk rationalizes these results.