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Credit Shocks Harm the Unprepared - Financing Constraints and the Financial Crisis


  • Hetland, Ove Rein

    () (Ernst & Young Transaction Advisory Services, Stavanger, and Institute for Research in Economics and Business Administration (SNF))

  • Mjøs, Aksel

    () (Dept. of Finance and Management Science, Norwegian School of Economics and Business Administration)


We show that the investments of ex ante financially unconstrained firms are more profoundly affected by changes in credit supply than the investments of financially constrained firms. We employ a survey of Norwegian private firms concerning the impact of the financial crisis of 2008-9, linked to firm-level financial and bank accounts. Adverse changes in credit availability reduce investments after controlling for output demand, and this effect is largest for the least financially constrained firms. This is consistent with a model where financially constrained firms hedge against cash flow shortfalls whilst ex ante unconstrained firms rely on access to external funds.

Suggested Citation

  • Hetland, Ove Rein & Mjøs, Aksel, 2012. "Credit Shocks Harm the Unprepared - Financing Constraints and the Financial Crisis," Discussion Papers 2012/11, Norwegian School of Economics, Department of Business and Management Science.
  • Handle: RePEc:hhs:nhhfms:2012_011

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    References listed on IDEAS

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    3. Ben S. Bernanke & Mark Gertler, 1995. "Inside the Black Box: The Credit Channel of Monetary Policy Transmission," Journal of Economic Perspectives, American Economic Association, vol. 9(4), pages 27-48, Fall.
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    5. Toni M. Whited & Guojun Wu, 2006. "Financial Constraints Risk," Review of Financial Studies, Society for Financial Studies, vol. 19(2), pages 531-559.
    6. Chava, Sudheer & Purnanandam, Amiyatosh, 2011. "The effect of banking crisis on bank-dependent borrowers," Journal of Financial Economics, Elsevier, vol. 99(1), pages 116-135, January.
    7. Xavier Freixas & Jean-Charles Rochet, 2008. "Microeconomics of Banking, 2nd Edition," MIT Press Books, The MIT Press, edition 2, volume 1, number 0262062704, January.
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    9. Anonymous, 1994. "Monetary Policy Statement, December 1994," Reserve Bank of New Zealand Bulletin, Reserve Bank of New Zealand, vol. 57, December.
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    Cited by:

    1. Sandra M. Leitner & Robert Stehrer, 2016. "The Role of Financial Constraints for Different Innovation Strategies: Evidence for CESEE and FSU Countries," wiiw Working Papers 125, The Vienna Institute for International Economic Studies, wiiw.
    2. Alfranseder, Emanuel & Dzhamalova, Valeriia, 2014. "The Impact of the Financial Crisis on Innovation and Growth: Evidence from Technology Research and Development," Knut Wicksell Working Paper Series 2014/8, Lund University, Knut Wicksell Centre for Financial Studies.
    3. Michael Landesmann & Sandra M. Leitner & Robert Stehrer, 2016. "Changing Patterns in M&E-Investment-Based Innovation Strategies in CESEE and FSU Countries," wiiw Working Papers 123, The Vienna Institute for International Economic Studies, wiiw.

    More about this item


    Credit Shocks; Financing Constraints; Financial Crisis;

    JEL classification:

    • G00 - Financial Economics - - General - - - General

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