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The Effect of Restrictive Bank Lending on Innovation: Evidence from a Financial Crisis

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  • Stefan Kipar

Abstract

Using unique micro-data on German firms, this paper estimates the effect of restrictive bank lending on innovation. In the German three-pillar banking system, comprised of commercial banks, credit unions, and savings banks, firms were differently affected in their ability to raise external debt during the financial crisis depending on the pillar to which their main relationship bank belonged. Using this institutional feature as an instrument for credit access reveals that restrictive bank lending increases a firm’s probability of discontinuing innovation projects by 21.6 percentage points.

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  • Stefan Kipar, 2011. "The Effect of Restrictive Bank Lending on Innovation: Evidence from a Financial Crisis," ifo Working Paper Series 109, ifo Institute - Leibniz Institute for Economic Research at the University of Munich.
    • Handle: RePEc:ces:ifowps:_109
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    Cited by:

    1. de Ridder, Maarten, 2016. "Investment in productivity and the long-run effect of financial crises on output," LSE Research Online Documents on Economics 86180, London School of Economics and Political Science, LSE Library.
    2. Mariana Spatareanu & Vlad Manole & Ali Kabiri, 2017. "Do Bank Shocks Hamper Firms’ Innovation?," Working Papers Rutgers University, Newark 2017-003, Department of Economics, Rutgers University, Newark.
    3. Christian Seiler, 2012. "The Data Sets of the LMU-ifo Economics & Business Data Center – A Guide for Researchers," Schmollers Jahrbuch : Journal of Applied Social Science Studies / Zeitschrift für Wirtschafts- und Sozialwissenschaften, Duncker & Humblot, Berlin, vol. 132(4), pages 609-618.
    4. Michael Kleemann & Manuel Wiegand, 2014. "Are Real Effects of Credit Supply Overestimated? Bias from Firms' Current Situation and Future Expectations," ifo Working Paper Series 192, ifo Institute - Leibniz Institute for Economic Research at the University of Munich.
    5. Spatareanu, Mariana & Manole, Vlad & Kabiri, Ali, 2019. "Do bank liquidity shocks hamper firms’ innovation?," LSE Research Online Documents on Economics 116931, London School of Economics and Political Science, LSE Library.
    6. Spatareanu, Mariana & Manole, Vlad & Kabiri, Ali, 2019. "Do bank liquidity shocks hamper firms’ innovation?," International Journal of Industrial Organization, Elsevier, vol. 67(C).

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    More about this item

    JEL classification:

    • G01 - Financial Economics - - General - - - Financial Crises
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G30 - Financial Economics - - Corporate Finance and Governance - - - General
    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance
    • O30 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - General

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