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Credit Crunch Or not? Case of Turkey during the Global Economic Crisis


  • Mehmet Kerim Gokay

    () (Bahcesehir University)

  • Zumrut Imamoglu

    () (Bahcesehir University Center for Economic and Social Research (Betam))

  • Baris Soybilgen

    () (Bahcesehir University Center for Economic and Social Research (Betam))


This paper analyzes whether Turkish firms experienced a credit crunch at the outset of the global crisis. Our hypothesis is that if a credit crunch was experienced in Turkey, firms that are more dependent on external finance for investment and working capital must have been affected more severely. Hence, we should observe a higher drop in their stock returns during the crisis. Using firm-level data, we find that returns of firms with high dependence on external finance for working capital and balance sheet problems before the crisis decline more during the crisis. We also run the same regressions for pre-crisis drops in the stock market as a placebo test. We find that stock returns were not affected by dependence on external finance for investment and working capital in the non-crisis period. Our results suggest that Turkish firms might have experienced a credit crunch at the outset of the crisis even though Turkish banking sector was intact. On the other hand, we find no evidence for a demand effect: Being an exporter does not matter for the decrease in stock returns.

Suggested Citation

  • Mehmet Kerim Gokay & Zumrut Imamoglu & Baris Soybilgen, 2012. "Credit Crunch Or not? Case of Turkey during the Global Economic Crisis," Working Papers 006, Bahcesehir University, Betam.
  • Handle: RePEc:bae:wpaper:006

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    References listed on IDEAS

    1. Raddatz, Claudio, 2006. "Liquidity needs and vulnerability to financial underdevelopment," Journal of Financial Economics, Elsevier, vol. 80(3), pages 677-722, June.
    2. Thomas W. Bates & Kathleen M. Kahle & René M. Stulz, 2009. "Why Do U.S. Firms Hold So Much More Cash than They Used To?," Journal of Finance, American Finance Association, vol. 64(5), pages 1985-2021, October.
    3. Carlos A. Molina, 2005. "Are Firms Underleveraged? An Examination of the Effect of Leverage on Default Probabilities," Journal of Finance, American Finance Association, vol. 60(3), pages 1427-1459, June.
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    More about this item


    Financial Crisis; Credit Crunch; Turkey;

    JEL classification:

    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • G30 - Financial Economics - - Corporate Finance and Governance - - - General

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