Search

Bank specialization leads to expertise, including knowledge on zombie borrowers and the negative impact they exert on healthy borrowers. This induces specialized banks to reduce zombie lending. The reduction in zombie lending is larger when the scope and opportunity cost of negative spillovers to healthy borrowers is larger; namely, when the fraction of sectoral labor stuck in zombie firms is larger or when the sector is expected to grow faster. Additionally, specialized banks reduce zombie lending less in sectors with higher asset specificity, as zombie firms' default (and potential asset fire sales) could trigger reductions in healthy borrowers' collateral values.

This paper shows that, when the price of emission allowances is sufficiently high, emission trading schemes improve the emission efficiency of highly polluting firms. The efficiency gain comes from a relative decrease in emissions rather than a relative increase in operating revenue. Part of the improvement is realized via the acquisition of green firms. The size of the improvement depends on the initial allocation of free emission allowances: highly polluting firms receiving more emission allowances for free, such as firms on the carbon leakage list, have a weaker incentive to become more efficient. For identification, we exploit the tightening in EU ETS regulation in 2017, which led to a steep price increase of emission allowances and made the ETS regulation more binding for polluting firms.

We propose a new methodology to recover firm-year level financial constraints from firms' production behavior. We model financial constraints as the profitability that firms forgo when budget constraints on input costs bind, impeding them from using the optimal level inputs and technology in the production process. We estimate and validate our measure using a unique dataset combining firms' balance sheets from 2005 to 2015 in five Euro Area countries with survey information on firms' self-reported financial constraints, such as actual loan rejections or discouragement. Further, we show that our measure recovers the country-specific trends of financial constraints during the financial and sovereign debt crisis, and correlates only weakly with the three most popular indices of financial constraints., info:eu-repo/semantics/published

Farre-Mensa and Ljungqvist (2016, RFS) argue that the existing and widely used measures of financial constraints are inadequate and fail to measure financial constraints. We propose a new methodology to recover firm-year level financial constraints from firms' production behavior. In particular, we measure financial constraints as the profitability that firms forgo when binding constraints on input costs impede them from using the optimal level of inputs and technology. We validate our measure using a unique dataset combining firms' balance sheets from 2005 to 2015 in five Euro Area countries with survey information on firms' self-reported financial constraints, such as actual loan rejections or discouragement. Further, we show that our measure recovers the country-specific trends of financial constraints during the financial crisis and the sovereign debt crisis, and correlates only weakly with the three most popular indices of financial constraints., info:eu-repo/semantics/published

Current empirical methods to identify and assess the impact of bank credit supply shocks rely strictly on multi-bank firms and ignore firms borrowing from only one bank. Yet, these single-bank firms are often the majority of firms in an economy and most prone to credit supply shocks. We propose and underpin an alternative demand control (using industry-location-size-time fixed effects) that allows identifying timevarying cross-sectional bank credit supply shocks using both single- and multi-bank firms. Using matched bank-firm credit data from Belgium, we show that firms borrowing from banks with negative credit supply shocks exhibit lower financial debt growth, asset growth, investments, and operating margin growth. Positive credit supply shocks are associated with bank risk-taking behaviour at the extensive margin. Importantly, to capture these effects it is crucial to include the single-bank firms when identifying the bank credit supply shocks.

This paper uses a new survey-based data set and a model with strong theoretical under-pinnings to explain the characteristics and behaviour of discouraged borrowers in the euro area. The results show that more borrowers are discouraged when the average interest rate charged by banks in a country is higher. Higher corporate tax rates, on the other hand, lead to lower discouragement. We show that discouragement has strong negative effects on in- vestment growth (-4.7pp), employment growth (-2.7pp) and asset growth (-2.9pp) due to the lack of access to bank finance in the two years following the discouragement. Furthermore, we estimate that the majority of discouraged borrowers would be unable to get a loan if they would apply. Consistent with this low loan approval likelihood, discouraged borrowers tend to be relatively risky firms.

This paper uses a non parametric matching procedure to match survey replies to balance sheet information. It draws on the SAFE survey on access to finance for a sample of 11886 firms in the euro area which are matched with their nearest neighbour in an extended dataset with balance sheet information on 2.3 million firms. We investigate the role of rm characteristics with respect to the experience of facing financing obstacles in the period 2009-2011. We distinguish between firms' perceived financing constraints and actual financing constraints. We find that more pro table firms are less likely to face actual financing constraints. Also firms with more working capital and lower leverage ratios are less likely to be actually financially constrained, however profitability measures seem to be more robust. Firms are more likely to perceive access to finance problematic when they have more debt with short term maturity. Finally, rm age, but not size, is important in explaining both the perceived and the actual financial constraints.

While many theories of accounts payable and receivable are related to firm performance, there has not been a direct test whether firms actively use them to manage their growth. We argue that it is not just the accounts payable but also the accounts receivable that matter. While the former help to alleviate imperfections in the financial market, the latter do so in the product market. Using over 2.5 million observations for 600.000 firms in 8 euro area countries in the period 1993-2009, we show that firms use the trade credit channel to manage growth. In countries where the trade credit channel is more present, the marginal impact is lower, but the total impact is still bigger. Further, firms that are more vulnerable to financial market imperfections, and therefore more likely to be financially constrained, rely more on the trade credit channel to manage growth. Finally, we show that also the overall conditions of the financial market matter for the importance of the trade credit channel for growth.

In order for businesses to thrive, it is important that they can operate in an optimal economic environment. Such an optimal environment allows companies to create value for society in an efficient way. In this dissertation, I investigate three aspects of the general business environment. The first essay investigates if venture capital investors obtain a return that compensates them for the risks they take in their most successful portfolio companies. The second essay assesses the impact of supportive government policies that are available to small and medium sized enterprises on their financial performance. The third essay examines the impact of the business owner’s private wealth on the transmission of monetary policy via business credit supply.