Corporate Investment and Bank-Dependent Borrowers During the Recent Financial Crisis

53 Pages Posted: 23 Dec 2015

See all articles by Andra Buca

Andra Buca

European Central Bank (ECB)

Philip Vermeulen

European Central Bank (ECB)

Date Written: October 2015

Abstract

We use the recent financial crisis period to analyse the effect of bank credit tightening on real firm investment. We derive a new set of credit tightening indexes from the ECB Bank Lending Survey. Combining these with annual balance sheet data from Germany, France, Italy, Spain, Belgium and Portugal, we exploit the heterogeneity in the dependence on bank finance of different industries to identify real effects of credit tightening. We show that in response to tightening, investment falls substantially more in bank-dependent industries.

Keywords: corporate investment, financial crisis, credit crunch

JEL Classification: E22, E44, G01

Suggested Citation

Buca, Andra and Vermeulen, Philip, Corporate Investment and Bank-Dependent Borrowers During the Recent Financial Crisis (October 2015). ECB Working Paper No. 1859. Available at SSRN: https://ssrn.com/abstract=2707562

Andra Buca (Contact Author)

European Central Bank (ECB) ( email )

Sonnemannstrasse 22
Frankfurt am Main, 60314
Germany

Philip Vermeulen

European Central Bank (ECB) ( email )

Sonnemannstrasse 22
Frankfurt am Main, 60314
Germany

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