THE RESPONSE OF FIRM´ INVESTMENT AND FINANCING TO ADVERSE CASH FLOW SHOCKS - THE ROLE OF BANK RELATIONSHIPS

We test whether firms with a single bank are better shielded from loss of credit and investment cutsin periods of adverse cash flow shocks than firms with multiple bank relationships. Our estimatesof the cash flow sensitivity of investment show that both types of firms are equally subject tofinancing constraints that bind only in the event of adverse cash flow shocks...

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Year of publication:	2006-06-01
Authors:	Fuss, Catherine ; Vermeulen, Philip
Institutions:	European Central Bank
Subject:	Finanzierung \| finance \| Cashflow \| Unternehmen

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Abstract
Non-technical summary
1 Introduction
2 Related literature on bank relationships
3 Data
4 Adverse cash flow shocks, investment and bank relationships
5 How do firms manage periods of adverse liquidity shocks as a function of bank relationships
6 What explain the probability of obtaining extra bank debt in periods of adverse cash flow shocks
Conclusio
Reference
Appendix
European Central Bank Working Paper Series

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