Got Rejected? Real Effects of Not Getting a Loan

50 Pages Posted: 19 Sep 2016

See all articles by Tobias Berg

Tobias Berg

Frankfurt School of Finance & Management

Multiple version iconThere are 2 versions of this paper

Date Written: September 16, 2016


Using a lender cut-off rule that generates plausibly exogenous variation in credit supply, I analyze real effects of loan rejections in a sample of small and medium-sized enterprises. I find that loan rejections reduce asset growth, investments, and employment, and these effects are concentrated among low liquidity firms. Precautionary savings motives aggravate real effects: firms whose loan applications got rejected increase cash holdings and cut non-cash assets in excess of the requested loan amount. These results point to the amplifying effect of precautionary savings motives in the transmission of credit supply shocks.

Keywords: Credit supply, real effects, liquidity demand, precautionary savings

JEL Classification: G21, G32, J23

Suggested Citation

Berg, Tobias, Got Rejected? Real Effects of Not Getting a Loan (September 16, 2016). ECB Working Paper No. 1960, Available at SSRN:

Tobias Berg (Contact Author)

Frankfurt School of Finance & Management ( email )

Adickesallee 32-34
Frankfurt am Main, 60322

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