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Financial Constraints and Cash Holdings in Private Firms: Evidence from Discontinuous Credit Ratings

Author

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  • Bustos, Emil

    (Research Institute of Industrial Economics (IFN))

  • Engist, Oliver

    (Department of Economics)

Abstract

We study how financing constraints affect the cash holdings of small and medium-sized enterprises. There has been little empirical work on this topic, even though these firms often face financial constraints. We contribute by using detailed data on credit ratings in Sweden as a measure of financial constraints. We then use panel regressions and a regression-discontinuity analysis to estimate the relationship between access to credit and cash holdings. Our analysis finds no causal effect of credit ratings on cash holdings.

Suggested Citation

  • Bustos, Emil & Engist, Oliver, 2024. "Financial Constraints and Cash Holdings in Private Firms: Evidence from Discontinuous Credit Ratings," Working Paper Series 1493, Research Institute of Industrial Economics.
    • Handle: RePEc:hhs:iuiwop:1493
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    References listed on IDEAS

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    6. Bustos, Emil & Engist, Oliver & Martinsson, Gustav & Thomann, Christian, 2022. "Financing Constraints and Risk Management: Evidence From Micro-Level Insurance Data," Working Paper Series 1452, Research Institute of Industrial Economics.
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    14. Bustos, Emil, 2023. "The Effect of Financial Constraints on Inventory Holdings," Working Paper Series 1463, Research Institute of Industrial Economics.
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    More about this item

    Keywords

    Financial Constraints; Cash; Private Firm; Credit Score;
    All these keywords.

    JEL classification:

    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis
    • D25 - Microeconomics - - Production and Organizations - - - Intertemporal Firm Choice: Investment, Capacity, and Financing
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill

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