The Real Effects of Financial Constraints: Evidence from a Financial Crisis / Murillo Campello, John Graham, Campbell R. Harvey.

Format:

Book

Author/Creator:

Campello, Murillo.

Contributor:

National Bureau of Economic Research.

Graham, John.

Harvey, Campbell R.

Series:

Working Paper Series (National Bureau of Economic Research) no. w15552.

NBER working paper series no. w15552

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Other Title:

The Real Effects of Financial Constraints

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2009.

Summary:

We survey 1,050 CFOs in the U.S., Europe, and Asia to assess whether their firms are credit constrained during the global credit crisis of 2008. We study whether corporate spending plans differ conditional on this measure of financial constraint. Our evidence indicates that constrained firms planned deeper cuts in tech spending, employment, and capital spending. Constrained firms also burned through more cash, drew more heavily on lines of credit for fear banks would restrict access in the future, and sold more assets to fund their operations. We also find that the inability to borrow externally causes many firms to bypass attractive investment opportunities, with 86% of constrained U.S. CFOs saying their investment in attractive projects was restricted during the credit crisis of 2008. More than half of the respondents say they will cancel or postpone their planned investment. Our results also hold in Europe and Asia, and in many cases are stronger in those economies.

Notes:

Print version record

December 2009.