Journal Article

Access to Liquidity and Corporate Investment in Europe during the Financial Crisis*

Murillo Campello, Erasmo Giambona, John R. Graham and Campbell R. Harvey

in Review of Finance

Published on behalf of European Finance Association

Volume 16, issue 2, pages 323-346
Published in print April 2012 | ISSN: 1572-3097
Published online November 2011 | e-ISSN: 1573-692X | DOI: http://dx.doi.org/10.1093/rof/rfr030
Access to Liquidity and Corporate Investment in Europe during the Financial Crisis*

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We use a unique data set to show how firms in Europe used credit lines during the financial crisis. We find that firms with restricted access to credit (small, private, non-investment-grade, and unprofitable) draw more funds from their credit lines during the crisis than their large, public, investment-grade, profitable counterparts. Interest spreads increased (especially in “market-based economies”), but commitment fees remained unchanged. Our findings suggest that credit lines did not dry up during the crisis and provided the liquidity that firms used to cope with this exceptional contraction. In particular, credit lines provided the liquidity companies needed to invest during the crisis.

Keywords: G31

Journal Article.  9023 words. 

Subjects: Financial Law ; Financial Institutions and Services ; Financial Markets

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