TY - JOUR
T1 - Credit cycles and corporate investment: Direct tests using survey data on banks' lending practices
AU - Madsen, Jakob Brochner
AU - Carrington, Sarah
PY - 2012
Y1 - 2012
N2 - Microeconomic studies have found cash flow to be important for the investment decision and this result is often interpreted as evidence of adverse selection in credit markets. Using direct survey evidence on banks willingness to lend, this research examines the role of credit in the investment decision while allowing for cash-flow, Tobin s q, income, uncertainty and default risks. Regression analysis reveals that banks willingness to lend, income and uncertainty are the key drivers of cyclical fluctuations in corporate investment. These results have important implications for the conduct of monetary policy as well as research on business cycles.
AB - Microeconomic studies have found cash flow to be important for the investment decision and this result is often interpreted as evidence of adverse selection in credit markets. Using direct survey evidence on banks willingness to lend, this research examines the role of credit in the investment decision while allowing for cash-flow, Tobin s q, income, uncertainty and default risks. Regression analysis reveals that banks willingness to lend, income and uncertainty are the key drivers of cyclical fluctuations in corporate investment. These results have important implications for the conduct of monetary policy as well as research on business cycles.
U2 - 10.1016/j.jmacro.2011.12.003
DO - 10.1016/j.jmacro.2011.12.003
M3 - Article
SN - 0164-0704
VL - 34
SP - 429
EP - 440
JO - Journal of Macroeconomics
JF - Journal of Macroeconomics
IS - 2
ER -