IDEAS home Printed from https://ideas.repec.org/a/ete/revbec/20080101.html
   My bibliography  Save this article

The response of firms’ investment and financing to adverse cash flow shocks.The role of bank relationships in Belgium

Author

Listed:
  • F. Fuss
  • P. Vermeulen

Abstract

We test whether firms with a single bank are better shielded from loss of credit and investment cuts in periods of adverse cash flow shocks than firms with multiple bank relationships. Our estimates of the cash flow sensitivity of investment show that both types of firms are equally subject to financing constraints that bind only in the event of adverse cash flow shocks. In these periods, firms incur lower cuts in investment expenditures when they can obtain extra credit. In periods of adverse cash flow shocks, the probability of obtaining extra bank debt becomes more sensitive to the size and leverage of the firm. Our findings underscore the importance of controlling for size when investigating the role of bank relationships.

Suggested Citation

  • F. Fuss & P. Vermeulen, 2008. "The response of firms’ investment and financing to adverse cash flow shocks.The role of bank relationships in Belgium," Review of Business and Economic Literature, KU Leuven, Faculty of Economics and Business (FEB), Review of Business and Economic Literature, vol. 0(1), pages 5-34.
    • Handle: RePEc:ete:revbec:20080101
    as

    Download full text from publisher

    File URL: http://feb.kuleuven.be/rebel/jaargangen/2001-2010/2008/RBE%202008-1/2008-1%20-%20Fuss-Vermeulen.pdf
    Download Restriction: no
    ---><---

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. James R. Brown & Matthew T. Gustafson & Ivan T. Ivanov, 2021. "Weathering Cash Flow Shocks," Journal of Finance, American Finance Association, vol. 76(4), pages 1731-1772, August.

    More about this item

    Keywords

    financial constraints; lending relationships; firm investment; firm financing;
    All these keywords.

    JEL classification:

    • D92 - Microeconomics - - Micro-Based Behavioral Economics - - - Intertemporal Firm Choice, Investment, Capacity, and Financing

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ete:revbec:20080101. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: library EBIB (email available below). General contact details of provider: https://edirc.repec.org/data/fekulbe.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.