Charles A. Dice Center Working Paper No. 2012-03-002
48 Pages Posted: 13 Jan 2012 Last revised: 21 Jul 2017
Date Written: September 4, 2012
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: 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