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This study investigates the association between debt overhang and carbon emissions (both direct and indirect emissions) using a sample of US publicly listed firms.

The study applies generalized least squares (GLS) regression analyses to a sample of 2,043 US firm-year observations over a period of 14 years from 2007 to 2020. The methods include contemporaneous effect, lagged effect, alternative measures of carbon emissions and debt overhang, intensive versus non-intensive analysis, channel analysis, firm fixed effects, change analysis, controlling for credit rating analysis, propensity score matching approach, instrumental variable analysis with industry and year fixed effect.

This study's findings reveal that the debt overhang problem increases carbon emissions. This finding holds when the authors use alternative measures of carbon emissions and debt overhang. The authors find that carbon abatement investment is a channel that is negatively impacted by debt overhang, which in turn increases carbon emissions. This study's results are robust for several endogeneity tests, including firm fixed effects, change analysis, propensity score matching approach and two-stage least squares (2SLS) instrumental variable analysis.

The outcome of this research has policy implications for several stakeholders, including investors, firms, market participants and regulators. This study's findings offer insights for investors and firms, helping them allocate resources effectively and make financing decisions aimed at reducing carbon emissions. Regulators and policymakers can also use the findings to formulate policies that promote alternative sustainable finance practices.

The outcome of this research is likely to help firms develop their understanding of the debt overhang problem and undertake strategies that yield a significant amount of funding to invest in reducing carbon emissions.

We develop a credit-risk model to study the informational role of investment in an economy susceptible to large liquidity shocks. Firms' investment decisions carry information about their asset quality, thereby mitigating informational frictions when firms enter bankruptcy. An increase in aggregate investment can reduce the informational value of investment, depressing firms' recovery values. Therefore, policies boosting investment can decrease debt and firm values by reducing the informational value of investment. The presence of debt overhang may enhance firm value by making firms' investment decisions more informative. We present suggestive empirical evidence consistent with model predictions on the relation between firms' investments and recovery rates.

This study aims to test the dynamic impact of public debt and economic growth on newly democratized African countries (South Africa and Namibia) and compare the findings with those of newly democratized European countries (Germany and Ukraine) during the period 1990–2022.

The methodology involves three stages: identifying the appropriate transition variable, assessing the linearity between public debt and economic growth and selecting the order m of the transition function. The linearity test helps identify the nature of relationships between public debt and economic growth. The wild cluster bootstrap-Lagrange Multiplier test is used to evaluate the model’s appropriateness. All these tests would be executed using the Lagrange Multiplier type of test.

The results signify the policy switch, as the authors find that the relationship between public debt and economic growth is characterized by two transitions that symbolize that the current stage of the relationship is beyond the U-shape; however, an S-shape. The results show that for newly democratized African countries, the threshold during the first waves was 50% of GDP, represented by a U-shape, which then transits to an inverted U-shape with a threshold of 65% of GDP. Then, for the European case, it was 60% of GDP, which is now 72% of GDP.

The findings suggest that an escalating level of public debt has a negative impact on economic growth; therefore, it is important to implement fiscal discipline, prioritize government spending and reduce reliance on debt financing. This can be achieved by focusing on revenue generation, implementing effective taxation policies, reducing wasteful expenditures and promoting investment and productivity-enhancing measures.

The research questions to be answered by this meta-analysis are as follows: What is the average effect in the literature of an increase in debt on a country’s economic growth? Is the direction of this link positive, negative or zero? Is there, and to what extent, a certain degree of heterogeneity in the results of the studies analyzed? If heterogeneity exists, what influences it? Is there publication bias in this area of research? If so, in which direction?

The methodology employed in the development of a meta-analysis of the literature regarding the debt–growth relationship is based on the seminal paper by Stanley and Jarrell (2005). In this research, we endeavor to adhere as closely as possible to the reporting guidelines established by the Meta-Analysis of Economics Research Network (MAER-Net) (Stanley et al. (2013)), which have been recently updated by Havránek et al. (2020). Therefore, we will first define the effect size and describe the coding phase of the studies. Subsequently, we will present the forest plot and analyze publication bias. The theoretical model adopted will be introduced, and the results concerning the analysis with fixed effects, random effects and the moderator analysis will be shown. Finally, several meta-regressions will be estimated. Additional material can be found in online Appendix.

First, with regard to publication bias, the analysis indicated a positive asymmetry of the funnel plot, which led to an over-representation of studies with positive effect sizes. The estimated average effect size, as determined by this analysis, is situated between −0.5 and −0.9. Additionally, the substantial prevalence of p-values below 0.05, as evidenced by the three-parameter selection model and the p-curve analysis, indicates the presence of publication bias. Statistically significant results at the 95% level are more likely to be published than results with p-values exceeding the 0.05 threshold. The mean effect size is −0.2 in the multi-level analysis, while it is slightly larger in absolute terms in the analysis of the entire sample and zero in the reduced sample (where the average PCC for each study is considered). Heterogeneity is a prominent feature of the data, with differences observed both within and between studies. The within-study variability is more pronounced than the between-study variability. Heterogeneity persists when moderators are analyzed. Among these, the moderators that lower the level of heterogeneity and thus explain the different estimates across studies are region, income and development level, the variables used as proxies and the methodology used.

First, the paper sets out to quantify the debt–growth nexus, using all the relevant literature. In the most recent crises, policymakers have taken expansive fiscal policy measures to stimulate the economy. Many academics concur with this approach. Given the limited spending capacity of some economies, new debt instruments have been adopted, for example, in Europe, to finance NRRPs. It is therefore of great interest to ascertain the extent to which new debt issuance is correlated with higher economic growth and to examine how this correlation varies over time and across different geographical locations. The meta-analysis by Heimberger (2023) primarily focuses on the nonlinearities of this relationship, which we do not rule out characterizing. In contrast, here we propose the first comprehensive meta-analysis on the linear relationship between public debt and growth. Furthermore, this study introduces the use of the partial correlation coefficient (PCC) as an effect size. This is the inaugural study of this coefficient in the context of the debt–growth relationship, and it offers several advantages. Indeed, the variable employed is unitless, thereby facilitating the comparison of studies conducted with disparate methodologies, samples and numbers of regressors. Nevertheless, our estimates can serve as a reference point for those who wish to propose supplementary meta-analyses employing a distinct effect size. Moreover, the analysis is robust in all its points, as several methods are proposed both to identify publication bias, to analyze moderators and to assess the average effect size and heterogeneity. Indeed, one novelty is the use of estimation techniques such as deep moderator analysis and the BMA method for metaregression. Finally, for the first time, we include both continuous and categorical moderators (which are transformed into dummy variables only for the Bayesian model averaging analysis). In addition, we analyze additional moderators not considered in previous meta-analyses, such as region, external debt, income level, proxies for dependent and independent variables and focus on nonlinearities.

To fully comprehend the significance of Islam in Islamic Finance, it is imperative to delve deeper into the ontology, epistemology and axiology of Islamic principles. Ontology is concerned with the foundation of reality, whilst epistemology covers the learning process. Then, axiology talks about the subject's values, norms and principles. This chapter covers the ontology of the Knowledge from an Islamic perspective, which, epistemologically speaking, is believed to be eternal, unchanging and universal by the believer. Therefore, having a profound understanding of the ontology and epistemology of the source and the Knowledge, the discussion continues the axiology of Islamic finance principles, which is paramount to understanding the role of Islam in modern financial systems.

Ontology is concerned with the foundational building blocks that become the governing rules, i.e. the relationships between the Almighty and His creations. It is crucial to acknowledge the eternality of the Creator, as He is not in comparison to His creation. The epistemology of Islam placed Al-Qur'an as the Book and Muhammad (Peace Be Upon Him – PBUH) and the Messenger of Allah (swt) as the Archetypal model. The Book is the Meta framework that serves as the ultimate authority. Muhammad (PBUH) led and taught his generation how to run a state, organize public affairs and restore justice in law and rulings. It is his sayings and behaviours that Muslims refer to ethics and good behaviour (akhlaqul karimah) as the axiology of Islam. These are fundamentals before embarking to the adaptability of Islamic finance principles into policy.

We show that debt financing can increase firm value by serving as a commitment device in the presence of information asymmetry.

We develop a model in which firms privately learn the true quality of their investment projects over time, which can cause adverse selection when these firms seek to raise additional capital for new investments in later stages. Using this framework, we investigate the optimal capital structure of firms that can mitigate the adverse selection that is expected to arise in the future.

We find that each firm’s owner may choose to issue debt ex ante to avoid the adverse selection in the future because the intentionally created debt burden will hurt firms with low-quality investment projects more severely, discouraging these firms from mimicking high-quality firms to raise additional capital for new investments. Our model also predicts that equity or enterprise values of firms in the industry with higher leverages will diverge more significantly over time.

Our paper contributes to the capital structure literature by providing a novel mechanism to show that debt financing can improve firm value by acting as a commitment device in the presence of information asymmetry.

This study is aimed at interrogating the mediation role of public spending in domestic debt and economic growth nexus, drawing on debt overhang theory and the Keynesian view.

The study deployed a time series data (from 1981 to 2020) set drawn from the 2021 Central Bank of Nigeria (CBN) statistical bulletin. The mediation effect of public spending was tested by performing structural equation modeling after pre-estimation Augmented Dickey-Fuller unit root test.

Overall, the study outcomes indicate that domestic debt and public spending have significant positive effects on economic growth. Additionally, the study finds public spending to partially mediate domestic debt and economic growth nexus.

This study's outcomes provide insights that will enable fiscal policymakers to focus on internal borrowing, keep it under strict control to avert crowding out effects and improve public spending on productive projects to stimulate economic growth.

As the first study to question the mediation effect of public spending in domestic debt-economic growth relationship, it deepens and extends extant literature on domestic debt-economic growth nexus.

This paper aims to examine the factors that contribute to the external debt growth in Ghana.

The study adopts the autoregressive distributed lag (ARDL) model and the error correction model (ECM) to establish the short-run and long-run relationships between the dependent variable (external debt) and the independent variables (debt service, exchange rate, gross domestic product, government expenditure, import and trade openness), using a time series data spanning from 1990 to 2019.

The results indicate that debt service, GDP, government expenditure and trade openness have a positive and significant relationship with external debt, while import and exchange rates have a negative relationship with external debt in the long run. In the short run, debt service, import, exchange rate and trade openness have a positive and significant relationship with external debt, while GDP has a negative relationship with external debt.

The study found that variables such as government expenditure, debt service and import contribute significantly to the nation’s external debt stock. These findings suggest that policymakers should focus on prioritising and cutting down expenditure in their quest to curtail the debt menace facing the nation. Since existing debt service has the tendency of influencing debt stock, it is recommended that government should reduce borrowing in order avoid debt trap. Home-grown policies to reduce imports must also be encouraged. As these drivers of external debt are tackled head-on, Ghana can be rightly positioned to record lower levels of public debt and subsequently reap the benefits of economic growth.

The study adds to the public debt literature, specifically addressing the idiosyncratic determinants of external debt within the Ghanaian context.

This study assessed the role of political institutions in the relationship between economic institutions and public debt in Sub-Saharan Africa.

Based on data availability, the study was done for 40 Sub-Saharan African countries from 2010 to 2019 employing generalized method of moment.

The authors documented a negative and significant relationship between economic institutions and public debt as well as a negative and significant effect of political institutions on public debt in SSA. Also, the study recorded that political institutions play a negative and significant role in the economic institutions-public debt nexus in Sub-Saharan Africa. However, a threshold of 3.691 is given when it comes to the role of political institutions in the association between government spending and public debt nexus in SSA.

The authors failed to take certain indicators of economic institutions, such as freedom to trade internationally, the size of government and legal system and property into consideration.

The authors suggest that democracy is necessary for boosting economic institutions-induced public debt reduction in SSA.

The novelty of this study is evident in two ways: first, the authors assessed the relationship between economic institutions and public debt in SSA using novel measures such as government integrity, tax burden and government spending from the Heritage Foundation instead of traditional institution measures from World Governance Indicators used by earlier studies. The authors further contribute to literature by being the first to consider the foundational role of political institutions in employing economic institutions to fight high public debt in SSA. Again, the authors included the threshold at which political institutions can cause economic institutions to have a desired impact on public debt in SSA.

The paper investigates if the process that led to the birth of the Euro Area had a significant impact in homogenizing the capital structure decisions of European firms since the first introduction of the common currency.

A large sample of firms was constructed, and a Tobit-censored regression model was utilized to investigate the determinants of firms' observed capital structures. The Black–Scholes–Merton model was used to infer market values of assets, as well as the volatility of those values, from the observed market values of equity and the corresponding volatility. The existing differences in national tax rules were considered for estimating firm-specific marginal tax rates.

It was found that, despite the currency union and the institutional harmonization process, certain factors still play a different role. In particular, the impact of profitability is consistent with the pecking order view in some countries, and with the trade-off theory in others. Assets risk, measured as the annualized volatility of the market enterprise value, is the best predictor of observed leverage ratios. The sector of activity is significant in determining leverage decisions even when assets' risk is taken into account. Despite the monetary union and the increased financial and institutional integration in the Euro Area, the country of origin still plays a significant role in capital structure decisions, suggesting that other country-level factors may affect firms' financing behaviour.

The paper indicates that, despite the long harmonization process of institutions, regulations and public budget required to join the Euro, firms' financing decisions are still affected by country-specific factors once the common currency is introduced. Therefore, new entrant countries in the Euro area should not expect their companies to immediately conform with those located in other countries within the common currency area.

This article investigated the impact of the currency change from national currencies to the Euro on the determinants of capital structure choices. It was shown that, despite the long harmonization process that led to the birth of the Euro Area, national factors still affect firms' financing decisions. This provides guidance for policymakers in countries that are planning to join the Euro about the impact this will have on firms' financing decisions in the entrant country.