Access to credit and firm survival during a crisis: the case of zero-bank-debt firms
Roberto Blanco,
Miguel Garcia-Posada,
Sergio Mayordomo and
Maria Rodriguez-Moreno
No 2421, Working Papers from Banco de España
Abstract:
We study the access to credit and the propensity to exit the market of firms with no bank debt (the main funding source of Spanish non-listed firms) around the COVID-19 crisis. Our methodology allows us to disentangle credit supply from credit demand, as having no bank debt may be the result of financial constraints or a deliberate strategy. Before the COVID-19 crisis, zero-bank-debt firms, especially risky ones, faced more difficult access to bank loans than firms that had previously held bank debt owing to their lack of credit history. These credit constraints were tightened by the COVID shock, regardless of firms’ risk, arguably because of increased information asymmetries during a period of high macroeconomic uncertainty. Zero-bank-debt firms, even those with a low probability of default, were much more likely to leave the market during the COVID-19 crisis than firms with a history of bank debt. Moreover, granting new credit to zero-bank-debt firms reduced their probability of exit, which suggests a causal relationship between the two aforementioned findings. Beyond the specific setting of the pandemic, this paper adds to the broader literature on a better understanding of supply and demand-side constraints for corporate external funding, as crystalised in zero-debt firms.
Keywords: zero-debt firms; credit constraints; information asymmetries; guarantees; market exit (search for similar items in EconPapers)
JEL-codes: G21 G30 G32 (search for similar items in EconPapers)
Pages: 53 pages
Date: 2024-06
New Economics Papers: this item is included in nep-ban, nep-fdg and nep-sbm
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https://www.bde.es/f/webbe/SES/Secciones/Publicaci ... 24/Files/dt2421e.pdf First version, June 2024 (application/pdf)
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Journal Article: Access to credit and firm survival during a crisis: The case of zero-bank-debt firms (2024)
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Persistent link: https://EconPapers.repec.org/RePEc:bde:wpaper:2421
DOI: 10.53479/36752
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