Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/154393
Authors: 
Berg, Tobias
Year of Publication: 
2016
Series/Report no.: 
ECB Working Paper 1960
Abstract: 
Using a lender cut-off rule that generates plausibly exogenous variation in credit supply, I analyze real effects of loan rejections in a sample of small and medium-sized enterprises. I find that loan rejections reduce asset growth, investments, and employment, and these effects are concentrated among low liquidity firms. Precautionary savings motives aggravate real effects: firms whose loan applications got rejected increase cash holdings and cut non-cash assets in excess of the requested loan amount. These results point to the amplifying effect of precautionary savings motives in the transmission of credit supply shocks.
Subjects: 
credit supply
liquidity demand
precautionary savings
real effects
JEL: 
G21
G32
J23
Document Type: 
Working Paper

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