Credit Supply Shocks: Financing Real Growth or Takeovers?
46 Pages Posted: 1 Dec 2015 Last revised: 2 Sep 2022
Date Written: August 1, 2022
Abstract
How do firms invest when financial constraints are relaxed? We document that firms affected by a large positive credit supply shock predominantly increase borrowing for transaction-based purposes. These treated firms have larger asset and employment growth rates; however, the growth stems entirely from increased takeover activity. Announcement returns indicate that the quality of the credit-supply-induced takeover activity is low. These results offer the possibility that credit-driven growth can simply reflect redistribution, rather than net gains in assets or employment.
Keywords: Inorganic Growth, Credit Supply, Real Effects, Securitization
JEL Classification: G21, G23, G32, G32
Suggested Citation: Suggested Citation