Access to Liquidity and Corporate Investment in Europe During the Financial Crisis

38 Pages Posted: 25 Nov 2010 Last revised: 23 Aug 2011

See all articles by Murillo Campello

Murillo Campello

Cornell University - Samuel Curtis Johnson Graduate School of Management; National Bureau of Economic Research (NBER)

Erasmo Giambona

Syracuse University - Whitman School of Management - Finance Department; James D. Kuhn Center for Real Estate

John R. Graham

Duke University; National Bureau of Economic Research (NBER)

Campbell R. Harvey

Duke University - Fuqua School of Business; National Bureau of Economic Research (NBER); Duke Innovation & Entrepreneurship Initiative

Date Written: August 18, 2011

Abstract

We use a unique dataset to show how firms in Europe used credit lines during the financial crisis. We find that firms with restricted access to credit (small, private, non-investment grade, and unprofitable) draw more funds from their credit lines during the crisis than their large, public, investment-grade, profitable counterparts. Interest spreads increased (especially in “market-based economies”), but commitment fees remained unchanged Our findings suggest that credit lines did not dry up during the crisis and provided the liquidity that firms used to cope with this exceptional contraction. In particular, credit lines provided the liquidity companies needed to invest during the crisis.

Keywords: Financial Crisis, Investment Spending, Lines of Credit

JEL Classification: G31

Suggested Citation

Campello, Murillo and Giambona, Erasmo and Graham, John Robert and Harvey, Campbell R., Access to Liquidity and Corporate Investment in Europe During the Financial Crisis (August 18, 2011). Available at SSRN: https://ssrn.com/abstract=1713541 or http://dx.doi.org/10.2139/ssrn.1713541

Murillo Campello

Cornell University - Samuel Curtis Johnson Graduate School of Management ( email )

114 East Avenue
369 Sage Hall
Ithaca, NY 14853
United States

HOME PAGE: http://www.johnson.cornell.edu/Faculty-And-Research/Profile.aspx?id=mnc35

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138

Erasmo Giambona (Contact Author)

Syracuse University - Whitman School of Management - Finance Department; James D. Kuhn Center for Real Estate ( email )

721 University Avenue
RM 120-D
Syracuse, NY 13244-2450
United States
315 443-4885 (Phone)

John Robert Graham

Duke University ( email )

Box 90120
Durham, NC 27708-0120
United States
919-660-7857 (Phone)
919-660-8030 (Fax)

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Campbell R. Harvey

Duke University - Fuqua School of Business ( email )

Box 90120
Durham, NC 27708-0120
United States
919-660-7768 (Phone)
919-660-8030 (Fax)

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Duke Innovation & Entrepreneurship Initiative ( email )

215 Morris St., Suite 300
Durham, NC 27701
United States

Register to save articles to
your library

Register

Paper statistics

Downloads
455
Abstract Views
4,024
rank
61,212
PlumX Metrics