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Does Bank Lending Matter for Large Firms' Investment?

Marios Karabarbounis
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Marios Karabarbounis: Federal Reserve Bank of Richmond,

Economic Quarterly, 2015, issue 4Q, 303-317

Abstract: This paper analyzes how firm investment is affected by changes in bank lending. The analysis uses firm-level data on investment and bank loan issuance. To capture variations in credit availability, I use a firm's exposure to banks that experienced financial disruptions, in the spirit of Chodorow-Reich (2014). I find that firms in lending relationships with banks that sharply decreased their lending did not significantly decrease their investment compared with firms in relationships with healthier banks. In contrast, more traditional measures of bank lending show a strong correlation between credit availability and firms' investment.

Date: 2015
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DOI: 10.21144/eq1010402

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