External Financing Constraints and Firm’s Innovative Activities During the Financial Crisis

ZEW Discussion Paper Nr. 17-064 // 2017
ZEW Discussion Paper Nr. 17-064 // 2017

External Financing Constraints and Firm’s Innovative Activities During the Financial Crisis

We investigate the effect of individual banks’ liquidity shocks during the recent financial crisis of 2008/2009 on the innovation activities of their business customers. Individual banks’ liquidity shocks are identified by the degree of interbank market usage. We use a difference-in-differences approach to identify the effect of interbank reliance during the crisis on total innovation expenditures in comparison to the periods before. Our results imply that those firms which have a business relation to a bank with higher interbank market reliance reduce their innovation activities during the financial crisis to a higher degree than other firms.

Giebel, Marek und Kornelius Kraft (2017), External Financing Constraints and Firm’s Innovative Activities During the Financial Crisis, ZEW Discussion Paper Nr. 17-064, Mannheim.

Autoren/-innen Marek Giebel // Prof. Dr. Kornelius Kraft