Lines of Credit and Investment: Firm-Level Evidence of Real Effects of the Financial Crisis
Using Swedish bank lending data, investment data and accounting data, I examine how the financial crisis affected corporate investment through its effect on credit availability. Sensitivity to a credit supply shock is measured as credit reserves, defined as unused credit on lines of credit. I find that firms with low credit reserves reduced investment significantly more than other firms. However, it is not possible to determine that this relationship was caused by a shift in the supply of credit. Overall, I find no statistically strong evidence that the decline in investment was exacerbated by a contraction in credit supply.
|Date of creation:||01 Nov 2013|
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