Credit constraints, firm investment and employment: Evidence from survey data

Miguel Garcia-Posada

Journal of Banking & Finance, 2019, vol. 99, issue C, 121-141

Abstract: This paper assesses the impact of credit constraints on investment, inventories and employment using a large sample of firms from 12 European countries for the period 2014–2017. The data come from the Survey on the Access to Finance of Enterprises (SAFE), which contains direct information on the financial constraints faced by non-financial companies. The key identification challenge is a potential omitted variable bias, as firms with poor investment and growth opportunities may have a higher probability of being credit constrained. This problem is addressed by using an instrumental variable that is based on the allocation rule of the ECB's Targeted Longer-Term Refinancing Operations (TLTROs). The main findings suggest that credit constraints have strong negative effects on investment in fixed assets, while they have no impact on employment or inventories. Unconventional monetary policy may spur investment by reducing the incidence of credit constraints, especially in the case of large and old firms.

Keywords: Credit constraints; Investment; Employment; Inventories; Instrumental variables; TLTRO (search for similar items in EconPapers)
JEL-codes: G30 G31 G32 (search for similar items in EconPapers)
Date: 2019
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (11)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0378426618302693
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:jbfina:v:99:y:2019:i:c:p:121-141

DOI: 10.1016/j.jbankfin.2018.11.016

Access Statistics for this article

Journal of Banking & Finance is currently edited by Ike Mathur

More articles in Journal of Banking & Finance from Elsevier
Bibliographic data for series maintained by Catherine Liu ().