NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

The Firm-Level Credit Multiplier

Murillo Campello, Dirk Hackbarth

NBER Working Paper No. 17805
Issued in February 2012
NBER Program(s):   CF

We study the effect of asset tangibility on corporate financing and investment decisions. Financially constrained firms benefit the most from investing in tangible assets because those assets help relax constraints, allowing for further investment. Using a dynamic model, we characterize this effect - which we call firm-level credit multiplier - and show how asset tangibility increases the sensitivity of investment to Tobin's Q for financially constrained firms. Examining a large sample of manufacturers over the 1971-2005 period as well as simulated data, we find support for our theory's tangibility-investment channel. We further verify that our findings are driven by firms' debt issuance activities. Consistent with our empirical identification strategy, the firm-level credit multiplier is absent from samples of financially unconstrained firms and samples of financially constrained firms with low spare debt capacity.

download in pdf format
   (631 K)

email paper

This paper is available as PDF (631 K) or via email.

Machine-readable bibliographic record - MARC, RIS, BibTeX

Document Object Identifier (DOI): 10.3386/w17805

Published: Campello, Murillo & Hackbarth, Dirk, 2012. "The firm-level credit multiplier," Journal of Financial Intermediation, Elsevier, vol. 21(3), pages 446-472. citation courtesy of

Users who downloaded this paper also downloaded these:
Bond, Edmans, and Goldstein w17719 The Real Effects of Financial Markets
Campello and Giambona w18147 Real Assets and Capital Structure
Becker and Ivashina w17392 Cyclicality of Credit Supply: Firm Level Evidence
Krusell, Mukoyama, Rogerson, and Sahin w17779 Is Labor Supply Important for Business Cycles?
Kuznets On Comparative Study of Economic Structure and Growth of Nations
 
Publications
Activities
Meetings
NBER Videos
Data
People
About

Support
National Bureau of Economic Research, 1050 Massachusetts Ave., Cambridge, MA 02138; 617-868-3900; email: info@nber.org

Contact Us