Out with the New, In with the Old? Bank Supervision and the Composition of Firm Investment

Thorsten Beck, Miguel Ampudia and Alexander Popov

No 16225, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: Using exogenous variation generated by the creation of the Single Supervisory Mechanism (SSM) in the euro area, we find that relative to firms borrowing from banks remaining under national supervision, firms borrowing from SSM-supervised banks reduce intangible assets and increase tangible assets and cash holdings. These effects do not pre-date the supervisory reform, do not obtain in non-SSM jurisdictions, and coincide with reductions in long-term debt and labor productivity. The reallocation of investment away from intangible assets is stronger in innovation-intensive sectors, suggesting that centralized bank supervision can slow down the shift from the capital-based to the knowledge-based economy.

Keywords: Banking; supervision; lending; investment; Intangibles (search for similar items in EconPapers)
JEL-codes: G21 G28 (search for similar items in EconPapers)
Date: 2021-06
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