Shifts in global credit and corporate access to finance

Chiara Banti and Udichibarna Bose

Journal of Financial Stability, 2024, vol. 74, issue C

Abstract: Employing a dataset of 1,160 Indian firms, we study the impact of global financing conditions on firms’ borrowings abroad across different phases of global credit. While the abundant credit in the post global financial crisis period allowed firms to take advantage of relatively cheap financing abroad, we show that firms’ access to external finance has declined since 2013. We find that since 2013, lenders are differentiating across borrowers and it is specifically the less risky and more profitable firms that are increasing their foreign borrowings even at the times of higher global risk. We do not find evidence of regional and domestic credit offsetting this global effect. Furthermore, we find that the reduced access to external finance in the post-2013 period is associated with a decline in firms’ real investment activities, highlighting the real effects of global credit dynamics.

Keywords: Emerging markets; Foreign borrowings; Global credit; Regional linkages (search for similar items in EconPapers)
JEL-codes: F32 F34 G15 G30 (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:eee:finsta:v:74:y:2024:i:c:s1572308921000127

DOI: 10.1016/j.jfs.2021.100853

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