Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/311174 
Year of Publication: 
2025
Series/Report no.: 
ECB Working Paper No. 3008
Publisher: 
European Central Bank (ECB), Frankfurt a. M.
Abstract: 
To what extent can private firms' external equity substitute for debt financing in a banking crisis? To answer this question, I use firm-level data and firm-bank linkages to estimate the causal effect of an imported lending cut from a large German bank on firms' capital structure and real outcomes. The estimates imply that for every 1 euro reduction in debt, private firms in Germany received 0.27 euros of external equity. Firm-owner linkages indicate that outsiders provided equity funds in 40% of the firms that received an equity injection, while existing owners provided the funds in the rest. These findings highlight the importance of multiple sources of financing that can serve as backup facilities when the primary source of intermediation fails. The results also have implications for Macro-Finance heterogeneous firm models that typically overlook the role of equity financing.
Subjects: 
equity financing
banking crisis
capital and ownership structure
JEL: 
G01
G21
G32
E32
E44
Persistent Identifier of the first edition: 
ISBN: 
978-92-899-7000-6
Document Type: 
Working Paper

Files in This Item:
File
Size





Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.