Out of sight, out of mind? Global value chains and credit allocation during a financial crisis

We investigate the influence of firms' global status on the allocation of credit during a financial crisis. Using data on 15,000 businesses from seven European countries, we find that firms participating in global value chains were 25% less likely to be rationed by banks during the 2009 Great Recession. We next match information on the geography of firms' value chains with data on banks' branch and subsidiary networks. We find that banks especially insulated from credit rationing firms with supply chain relationships in the countries where banks have the largest presence. The results reveal that banks aimed at reducing spillovers on their lending and consulting activities with global chains rather than leveraging their knowledge of internationally traded products.