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Shifts in global credit and corporate access to finance

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  • Banti, Chiara
  • Bose, Udichibarna

Abstract

Employing a dataset of 1,160 Indian firms, we study the impact of global financing conditions on firms’ borrowings abroad across different phases of global credit. While the abundant credit in the post global financial crisis period allowed firms to take advantage of relatively cheap financing abroad, we show that firms’ access to external finance has declined since 2013. We find that since 2013, lenders are differentiating across borrowers and it is specifically the less risky and more profitable firms that are increasing their foreign borrowings even at the times of higher global risk. We do not find evidence of regional and domestic credit offsetting this global effect. Furthermore, we find that the reduced access to external finance in the post-2013 period is associated with a decline in firms’ real investment activities, highlighting the real effects of global credit dynamics.

Suggested Citation

  • Banti, Chiara & Bose, Udichibarna, 2024. "Shifts in global credit and corporate access to finance," Journal of Financial Stability, Elsevier, vol. 74(C).
    • Handle: RePEc:eee:finsta:v:74:y:2024:i:c:s1572308921000127
    DOI: 10.1016/j.jfs.2021.100853
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    More about this item

    Keywords

    Emerging markets; Foreign borrowings; Global credit; Regional linkages;
    All these keywords.

    JEL classification:

    • F32 - International Economics - - International Finance - - - Current Account Adjustment; Short-term Capital Movements
    • F34 - International Economics - - International Finance - - - International Lending and Debt Problems
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • G30 - Financial Economics - - Corporate Finance and Governance - - - General

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