Download this Paper Open PDF in Browser

Access to Capital, Investment, and the Financial Crisis

48 Pages Posted: 13 Jan 2012 Last revised: 21 Jul 2017

Kathleen M. Kahle

University of Arizona - Department of Finance

René M. Stulz

Ohio State University (OSU) - Department of Finance; National Bureau of Economic Research (NBER); European Corporate Governance Institute (ECGI)

Date Written: September 4, 2012

Abstract

During the financial crisis, corporate borrowing and capital expenditures fall sharply. Most existing research links the two phenomena by arguing that a shock to bank lending (or more generally to the corporate credit supply) caused a reduction in capital expenditures. The economic significance of this causal link is tenuous, as we find that (1) bank-dependent firms do not decrease capital expenditures more than matching firms in the first year of the crisis or in the two quarters after Lehman’s bankruptcy; (2) firms that are unlevered before the crisis decrease capital expenditures during the crisis as much as matching firms and, proportionately, more than highly levered firms; (3) the decrease in net debt issuance for bank-dependent firms is not greater than for matching firms; (4) the average cumulative decrease in net equity issuance is more than twice the average decrease in net debt issuance from the start of the crisis through March 2009; and (5) bank-dependent firms hoard cash during the crisis compared to unlevered firms.

Suggested Citation

Kahle, Kathleen M. and Stulz, René M., Access to Capital, Investment, and the Financial Crisis (September 4, 2012). Fisher College of Business Working Paper No. 2012-2; Journal of Financial Economics (JFE), Vol. 110, No. 2, 2013. Available at SSRN: https://ssrn.com/abstract=1984181 or http://dx.doi.org/10.2139/ssrn.1984181

Kathleen M. Kahle

University of Arizona - Department of Finance ( email )

McClelland Hall
P.O. Box 210108
Tucson, AZ 85721-0108
United States
520-621-7489 (Phone)

Rene M. Stulz (Contact Author)

Ohio State University (OSU) - Department of Finance ( email )

2100 Neil Avenue
Columbus, OH 43210-1144
United States

HOME PAGE: http://www.cob.ohio-state.edu/fin/faculty/stulz

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

European Corporate Governance Institute (ECGI)

c/o ECARES ULB CP 114
B-1050 Brussels
Belgium

Paper statistics

Downloads
929
Rank
19,649
Abstract Views
3,884