In neoclassical models of immigration's long-run effects, capital adjustment shields incumbent workers from losses by counteracting the decline in the marginal productivity of labor. This paper argues that, by inhibiting this adjustment, credit-market frictions amplify the negative wage and employment effects of immigration. I develop a model in which monopsonistic firms with higher initial debt burdens face endogenously steeper financing-cost curves. As a result, immigrant inflows decrease capital intensity, wages, and native employment by more at initially higher-leverage firms. I test these predictions using a custom link between German firms' financial statements and social security records. I first document that, in Germany during the 2010s, a large immigration shock coincided with a sharp decline in firms' capital intensity, and that the borrowing costs of initially higher-leverage firms were more sensitive to additional debt. Exploiting variation in the settlement patterns of earlier immigrants, I find that firms' immigrant hiring responses did not vary by their initial leverage. However, initially higher-leverage firms experienced sharper declines in their capital intensity, wages, and native employment, consistent with my model's predictions. My results imply that credit-market frictions are an underexplored determinant of how the economy absorbs labor supply shocks.
