Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/281672 
Year of Publication: 
2024
Publisher: 
ZBW - Leibniz Information Centre for Economics, Kiel, Hamburg
Abstract: 
Firms with ample financial slack are unconstrained... or are they? In a field experiment that randomly expands debt capacity on business credit lines, treated small-and-medium enterprises (SMEs) draw down 35 cents on the dollar of expanded debt capacity in the short-run and 55 cents in the long-run despite having debt levels far below their borrowing limit before the intervention. SMEs direct new borrowing to financing investment gradually over time and do not exhibit a measurable impact on delinquencies. Heterogeneity analysis by the risk of being at the credit line limit supports the SME motive to preserve financial flexibility.
Subjects: 
field experiment
RCT
finance
investment
debt structure
Document Type: 
Working Paper

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