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Access to credit and firm survival during a crisis: the case of zero-bank-debt firms

Author

Listed:
  • Roberto Blanco

    (Banco de España)

  • Miguel García-Posada

    (Banco de España)

  • Sergio Mayordomo

    (Banco de España)

  • María Rodríguez-Moreno

    (Banco de España)

Abstract

We study the access to credit and the propensity to exit the market of firms with no bank debt (the main funding source of Spanish non-listed firms) around the COVID-19 crisis. Our methodology allows us to disentangle credit supply from credit demand, as having no bank debt may be the result of financial constraints or a deliberate strategy. Before the COVID-19 crisis, zero-bank-debt firms, especially risky ones, faced more difficult access to bank loans than firms that had previously held bank debt owing to their lack of credit history. These credit constraints were tightened by the COVID shock, regardless of firms’ risk, arguably because of increased information asymmetries during a period of high macroeconomic uncertainty. Zero-bank-debt firms, even those with a low probability of default, were much more likely to leave the market during the COVID-19 crisis than firms with a history of bank debt. Moreover, granting new credit to zero-bank-debt firms reduced their probability of exit, which suggests a causal relationship between the two aforementioned findings. Beyond the specific setting of the pandemic, this paper adds to the broader literature on a better understanding of supply and demand-side constraints for corporate external funding, as crystalised in zero-debt firms.

Suggested Citation

  • Roberto Blanco & Miguel García-Posada & Sergio Mayordomo & María Rodríguez-Moreno, 2024. "Access to credit and firm survival during a crisis: the case of zero-bank-debt firms," Working Papers 2421, Banco de España.
  • Handle: RePEc:bde:wpaper:2421
    DOI: https://doi.org/10.53479/36752
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    References listed on IDEAS

    as
    1. Stiglitz, Joseph E & Weiss, Andrew, 1981. "Credit Rationing in Markets with Imperfect Information," American Economic Review, American Economic Association, vol. 71(3), pages 393-410, June.
    2. Strebulaev, Ilya A. & Yang, Baozhong, 2013. "The mystery of zero-leverage firms," Journal of Financial Economics, Elsevier, vol. 109(1), pages 1-23.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    zero-debt firms; credit constraints; information asymmetries; guarantees; market exit;
    All these keywords.

    JEL classification:

    • G30 - Financial Economics - - Corporate Finance and Governance - - - General
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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