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Real Effects of Rollover Risk: Evidence from Hotels in Crisis

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Listed:
  • Anthony A. DeFusco
  • Charles G. Nathanson
  • Michael Reher

Abstract

We analyze and find empirical support for a model of strategic renegotiation in which firms scheduled to roll over debt during a crisis reduce operations to discourage lenders from seizing the collateral. Our empirical analysis exploits contractual features of commercial mortgages that generate exogenous variation in whether debt matures during a crisis. A crisis debt maturity causes large relative drops in output, labor, and profits at the collateral property, even holding the borrower fixed. Consistent with the model, these real effects decrease with the lender’s operating adjustment costs, reverse after renegotiation, and occur primarily for highly-levered loans without term-extension options.

Suggested Citation

  • Anthony A. DeFusco & Charles G. Nathanson & Michael Reher, 2023. "Real Effects of Rollover Risk: Evidence from Hotels in Crisis," NBER Working Papers 31764, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:31764
    Note: CF
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    More about this item

    JEL classification:

    • G01 - Financial Economics - - General - - - Financial Crises
    • G3 - Financial Economics - - Corporate Finance and Governance
    • R3 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location

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