Title: Snow and leverage
Description: "Economists often argue that reducing a debt overhang improves borrowers' incentives and thus performance.  This paper provides empirical support for this argument using a sample of Austrian ski hotels undergoing debt restructurings.  The vast majority of the hotels experience substantial debt forgiveness, resulting in significant reductions in leverage of about 23% on average.  These reductions in leverage, in turn, cause 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, based on the argument that if a ski hotel had only little snow in the years prior, then the causes for the hotel's distress are more likely exogenous.  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% on average"--National Bureau of Economic Research web site.