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Lines of Credit and Investment: Firm-Level Evidence of Real Effects of the Financial Crisis

Author

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  • Holmberg, Karolina

    () (Monetary Policy Department, Central Bank of Sweden)

Abstract

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.

Suggested Citation

  • Holmberg, Karolina, 2013. "Lines of Credit and Investment: Firm-Level Evidence of Real Effects of the Financial Crisis," Working Paper Series 281, Sveriges Riksbank (Central Bank of Sweden).
  • Handle: RePEc:hhs:rbnkwp:0281
    as

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    File URL: http://www.riksbank.se/Documents/Rapporter/Working_papers/2013/rap_wp281_131118.pdf
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    References listed on IDEAS

    as
    1. Eric S. Rosengren & Joe Peek, 2000. "Collateral Damage: Effects of the Japanese Bank Crisis on Real Activity in the United States," American Economic Review, American Economic Association, vol. 90(1), pages 30-45, March.
    2. Ivashina, Victoria & Scharfstein, David, 2010. "Bank lending during the financial crisis of 2008," Journal of Financial Economics, Elsevier, vol. 97(3), pages 319-338, September.
    3. Amir Sufi, 2009. "Bank Lines of Credit in Corporate Finance: An Empirical Analysis," Review of Financial Studies, Society for Financial Studies, vol. 22(3), pages 1057-1088, March.
    4. Lins, Karl V. & Servaes, Henri & Tufano, Peter, 2010. "What drives corporate liquidity? An international survey of cash holdings and lines of credit," Journal of Financial Economics, Elsevier, vol. 98(1), pages 160-176, October.
    Full references (including those not matched with items on IDEAS)

    Citations

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    Cited by:

    1. Krainer, Robert E., 2014. "Monetary policy and bank lending in the Euro area: Is there a stock market channel or an interest rate channel?," Journal of International Money and Finance, Elsevier, vol. 49(PB), pages 283-298.
    2. A. Arrighetti & F. Landini & A. Lasagni, 2015. "Firms’economic crisis and firm exit: do intangibles matters?," Economics Department Working Papers 2015-EP04, Department of Economics, Parma University (Italy).
    3. Landini, Fabio & Arrighetti, Alessandro & Lasagni, Andrea, 2015. "Economic Crisis and Firm Exit: Do Intangibles Matter?," SEP Working Papers 2015/10, LUISS School of European Political Economy.

    More about this item

    Keywords

    Corporate investment; Crisis; Financial Markets and the Macroeconomy; Lines of Credit;

    JEL classification:

    • E22 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Investment; Capital; Intangible Capital; Capacity
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • G01 - Financial Economics - - General - - - Financial Crises
    • G31 - Financial Economics - - Corporate Finance and Governance - - - Capital Budgeting; Fixed Investment and Inventory Studies
    • 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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