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Access to Liquidity and Corporate Investment in Europe during the Financial Crisis

Author

Listed:
  • Murillo Campello
  • Erasmo Giambona
  • John R. Graham
  • Campbell R. Harvey

Abstract

We use a unique data set to show how firms in Europe used credit lines during the financial crisis. We find that firms with restricted access to credit (small, private, non-investment-grade, and unprofitable) draw more funds from their credit lines during the crisis than their large, public, investment-grade, profitable counterparts. Interest spreads increased (especially in "market-based economies"), but commitment fees remained unchanged. Our findings suggest that credit lines did not dry up during the crisis and provided the liquidity that firms used to cope with this exceptional contraction. In particular, credit lines provided the liquidity companies needed to invest during the crisis. Copyright 2011, Oxford University Press.

Suggested Citation

  • Murillo Campello & Erasmo Giambona & John R. Graham & Campbell R. Harvey, 2011. "Access to Liquidity and Corporate Investment in Europe during the Financial Crisis," Review of Finance, European Finance Association, vol. 16(2), pages 323-346.
  • Handle: RePEc:oup:revfin:v:16:y:2011:i:2:p:323-346
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    File URL: http://hdl.handle.net/10.1093/rof/rfr030
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    Cited by:

    1. Xiao, Min & You, Jiaxing & Zhao, Jingwen, 2017. "How Does Being Public Affect Firm Investment? Further Evidence from China," The International Journal of Accounting, Elsevier, vol. 52(1), pages 1-21.
    2. Nanda, Ramana & Nicholas, Tom, 2014. "Did bank distress stifle innovation during the Great Depression?," Journal of Financial Economics, Elsevier, vol. 114(2), pages 273-292.
    3. Bucă, Andra & Vermeulen, Philip, 2017. "Corporate investment and bank-dependent borrowers during the recent financial crisis," Journal of Banking & Finance, Elsevier, vol. 78(C), pages 164-180.
    4. Kadri Männasoo & Heili Hein, 2017. "Are R&D companies credit-constrained? Credit frictions during and post-crisis," TUT Economic Research Series 29, Department of Finance and Economics, Tallinn University of Technology.
    5. repec:eee:jbrese:v:79:y:2017:i:c:p:107-122 is not listed on IDEAS
    6. repec:eee:corfin:v:49:y:2018:i:c:p:344-378 is not listed on IDEAS
    7. Bernini, Michele & Montagnoli, Alberto, 2017. "Competition and financial constraints: A two-sided story," Journal of International Money and Finance, Elsevier, vol. 70(C), pages 88-109.
    8. Akbar, Saeed & Rehman, Shafiq ur & Ormrod, Phillip, 2013. "The impact of recent financial shocks on the financing and investment policies of UK private firms," International Review of Financial Analysis, Elsevier, vol. 26(C), pages 59-70.
    9. Davide Dottori & Giacinto Micucci, 2018. "Corporate liquidity in Italy and its increase in the long recession," Questioni di Economia e Finanza (Occasional Papers) 420, Bank of Italy, Economic Research and International Relations Area.
    10. Kristian Blickle, 2017. "Local Banks, Credit Supply, and House Prices," Working Papers on Finance 1811, University of St. Gallen, School of Finance.

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