Financial Constraints and Cash Holdings in Private Firms: Evidence from Discontinuous Credit Ratings

Emil Bustos and Oliver Engist
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Oliver Engist: Department of Economics, Postal: Stockholm School of Economics

No 1493, Working Paper Series from Research Institute of Industrial Economics

Abstract: We study how financing constraints affect the cash holdings of small and medium-sized enterprises. There has been little empirical work on this topic, even though these firms often face financial constraints. We contribute by using detailed data on credit ratings in Sweden as a measure of financial constraints. We then use panel regressions and a regression-discontinuity analysis to estimate the relationship between access to credit and cash holdings. Our analysis finds no causal effect of credit ratings on cash holdings.

Keywords: Financial Constraints; Cash; Private Firm; Credit Score (search for similar items in EconPapers)
JEL-codes: D22 D25 G32 (search for similar items in EconPapers)
Pages: 9 pages
Date: 2024-06-25
New Economics Papers: this item is included in nep-ban, nep-cfn, nep-ent and nep-sbm
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