Asset Overhang and Technological Change

83 Pages Posted: 29 Aug 2022

See all articles by Hans Degryse

Hans Degryse

KU Leuven - Faculty of Business and Economics (FEB)

Tarik Roukny

Massachusetts Institute of Technology (MIT); KU Leuven - Faculty of Business and Economics (FEB)

Joris Tielens

National Bank of Belgium

Date Written: September 05, 2024

Abstract

Investors face reduced incentives to finance technological change that devalues their legacy investments. We formalize this “asset overhang” and apply our framework to the climate-banking nexus. Leveraging (1) firm-level data on green innovation & diffusion and (2) the sets of product & technology market peers, we implement a shift-share design that identifies banks’ credit facilities impacted by green firm activities. We find that green firms imposing an asset overhang across all lenders are 3 to 7 p.p. more likely to report tight credit supply conditions. The presence of legacy-free investors mitigates the asset overhang problem, thereby facilitating technological change.

Keywords: Financial intermediation, Technological change, Innovation, Diffusion, Credit Rationing, Climate change

JEL Classification: G21, G32, Q54, Q55

Suggested Citation

Degryse, Hans and Roukny, Tarik and Roukny, Tarik and Tielens, Joris, Asset Overhang and Technological Change (September 05, 2024). Available at SSRN: https://ssrn.com/abstract=4194892 or http://dx.doi.org/10.2139/ssrn.4194892

Hans Degryse

KU Leuven - Faculty of Business and Economics (FEB) ( email )

Naamsestraat 69
Leuven, B-3000
Belgium

Tarik Roukny

KU Leuven - Faculty of Business and Economics (FEB) ( email )

Naamsestraat 69
Leuven, B-3000
Belgium

Massachusetts Institute of Technology (MIT) ( email )

77 Massachusetts Avenue
50 Memorial Drive
Cambridge, MA 02139-4307
United States

Joris Tielens (Contact Author)

National Bank of Belgium ( email )

Research Department
Boulevard de Berlaimont 14
B-1000 Brussels, 1000
Belgium

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