Costly external finance , corporate investment , and the subprime mortgage credit crisis

@inproceedings{Duchin2009CostlyEF,
  title={Costly external finance , corporate investment , and the subprime mortgage credit crisis},
  author={Ran Duchin and Oguzhan Ozbas and Berk A. Sensoy},
  year={2009}
}
We study the effect of the recent financial crisis on corporate investment. The crisis represents an unexplored negative shock to the supply of external finance for nonfinancial firms. Corporate investment declines significantly following the onset of the crisis, controlling for firm fixed effects and time-varying measures of investment opportunities. Consistent with a causal effect of a supply shock, the decline is greatest for firms that have low cash reserves or high net short-term debt, are… CONTINUE READING
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