TY - JOUR
T1 - Bank risk-taking and corporate investment
T2 - evidence from the Global Financial Crisis of 2007–2009
AU - Adachi-Sato, Meg
AU - Vithessonthi, Chaiporn
N1 - Funding Information:
We thank Dimitris Margaritis, Henk Berkman, Paul Geertsema, Helen Lu, John Byong-Tek Lee, Timothy F. Crack, Ivan Diaz-Rainey, I M Premachandra and seminar participants at the University of Auckland and the University of Otago for helpful comments on the earlier versions of this paper. We gratefully acknowledge financial support from Toshiba International Foundation (TIFO), Japan, and the Tokyo Center for Economic Research (TCER), Japan.
Publisher Copyright:
© 2020 Elsevier Inc.
PY - 2021/8
Y1 - 2021/8
N2 - In this paper, we explore the relation between the banking sector's risk-taking and a firm's investment (“corporate investment”). Specifically, we ask whether firms' cash holdings moderate the effect of the banking sector's risk-taking on corporate investment. Based on a panel sample of publicly listed non-financial firms in 15 EU countries during the period 1990–2015, we document several key findings. First, both cash holdings and the banking sector's risk-taking are positively associated with corporate investment. Second, bank loan growth, which roughly captures the supply of bank credit, is not related to corporate investment. Third, firms with smaller cash holdings disproportionately invest more than do firms with larger cash holdings during periods of higher risk-taking by the banking sector.
AB - In this paper, we explore the relation between the banking sector's risk-taking and a firm's investment (“corporate investment”). Specifically, we ask whether firms' cash holdings moderate the effect of the banking sector's risk-taking on corporate investment. Based on a panel sample of publicly listed non-financial firms in 15 EU countries during the period 1990–2015, we document several key findings. First, both cash holdings and the banking sector's risk-taking are positively associated with corporate investment. Second, bank loan growth, which roughly captures the supply of bank credit, is not related to corporate investment. Third, firms with smaller cash holdings disproportionately invest more than do firms with larger cash holdings during periods of higher risk-taking by the banking sector.
KW - Bank risk-taking
KW - Cash holding
KW - Corporate investment
KW - EU
UR - http://www.scopus.com/inward/record.url?scp=85091251396&partnerID=8YFLogxK
U2 - 10.1016/j.gfj.2020.100573
DO - 10.1016/j.gfj.2020.100573
M3 - Article
AN - SCOPUS:85091251396
SN - 1044-0283
VL - 49
JO - Global Finance Journal
JF - Global Finance Journal
M1 - 100573
ER -