Credit Supply and (In)organic Growth

59 Pages Posted: 1 Dec 2015 Last revised: 6 Dec 2019

See all articles by Tobias Berg

Tobias Berg

Frankfurt School of Finance & Management

Daniel Streitz

Copenhagen Business School

Michael Wedow

European Central Bank (ECB) - Directorate Financial Stability and Supervision

Date Written: November 30, 2019

Abstract

This paper highlights the importance of distinguishing between organic and inorganic growth when measuring real effects of financial frictions. Exploiting a quasiexogenous positive shock to credit supply, we document that affected firms borrow larger amounts and exhibit stronger asset, employment, and sales growth. All growth effects, however, are inorganic, and the quality of the credit supply induced acquisition activity is low. We provide a method for adjusting for inorganic growth components empirically and argue that it is important to distinguish inorganic from organic growth in any study that analyzes real effects of credit supply.

Keywords: Inorganic Growth, Credit Supply, Real Effects, Securitization

JEL Classification: G21, G23, G32, G32

Suggested Citation

Berg, Tobias and Streitz, Daniel and Wedow, Michael, Credit Supply and (In)organic Growth (November 30, 2019). BAFFI CAREFIN Centre Research Paper No. 2015-14. Available at SSRN: https://ssrn.com/abstract=2696906 or http://dx.doi.org/10.2139/ssrn.2696906

Tobias Berg (Contact Author)

Frankfurt School of Finance & Management ( email )

Adickesallee 32-34
Frankfurt am Main, 60322
Germany

Daniel Streitz

Copenhagen Business School ( email )

Solbjerg Plads 3
Frederiksberg C, DK - 2000
Denmark

Michael Wedow

European Central Bank (ECB) - Directorate Financial Stability and Supervision ( email )

Frankfurt a.M.
Germany

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