Klaas Mulier

Some Borrowers are More Equal than Others: Bank Funding Shocks and Credit Reallocation

This paper provides evidence on the strategic lending decisions made by banks facing a negative funding shock. Using bank-firm level credit data, we show that banks reallocate credit within their loan portfolio in at least three different ways. First, banks reallocate to sectors where they have a high market share. Second, they also reallocate to sectors in which they are more specialized. Third, they reallocate credit towards low-risk _rms. These reallocation effects are economically large. A standard deviation increase in sector market share, sector specialization or firm soundness reduces the transmission of the funding shock to credit supply by 22, 8 and 10 %, respectively.

The Real Effects of Credit Constraints: Evidence from Discouraged Borrowers in the Euro Area

This paper uses a new survey-based data set and a model with strong theoretical under-pinnings to explain the characteristics and behaviour of discouraged borrowers in the euro area. The results show that more borrowers are discouraged when the average interest rate charged by banks in a country is higher. Higher corporate tax rates, on the other hand, lead to lower discouragement. We show that discouragement has strong negative effects on in- vestment growth (-4.7pp), employment growth (-2.7pp) and asset growth (-2.9pp) due to the lack of access to bank finance in the two years following the discouragement. Furthermore, we estimate that the majority of discouraged borrowers would be unable to get a loan if they would apply. Consistent with this low loan approval likelihood, discouraged borrowers tend to be relatively risky firms. JEL Classification: G01, G10, G30, G32

The Impact of Bank Shocks on Firm-Level Outcomes and Bank Risk-Taking

Current empirical methods to identify and assess the impact of bank shocks rely strictly on firms borrowing from multiple banks and ignore the many firms borrowing from only one bank. Yet, such single-relationship firms may be the most prone and sensitive to bank-loan supply shocks. Therefore, we develop time-varying cross-sectional measures of bank-loan supply that include these single-relationship firms. Using bank-firm matched credit data from Belgium for the period 2002-2012, we examine their information content and impact on firm outcomes and bank risk-taking. Our estimated supply shocks correlate significantly with interbank liabilities growth and bank lending standards. Firms borrowing from banks with negative supply shocks exhibit lower growth, investment and sales. Positive supply shocks are associated with bank risk-taking behaviour at the extensive margin. Importantly, in order to capture these effects in our sample, it is crucial to include the single-relationship firms in the identification of the supply shocks.

VENTURE CAPITAL INTERNATIONALIZATION: SYNTHESIS AND FUTURE RESEARCH DIRECTIONS: VENTURE CAPITAL INTERNATIONALIZATION

Research on venture capital (VC) internationalization has expanded rapidly over the last decade. This paper reviews the extant literature on VC internationalization and highlights gaps in our knowledge. We identify three major research streams within this literature, which revolve around the following questions: (1) which VC firms invest across borders and what countries do they target; (2) how do VC firms address liabilities of foreign investing; and (3) what are the real effects of international VC investments? We provide an overview of the contributions in these research streams, discuss the role of public policy, and suggest avenues for future research. Specifically, we call for a deeper understanding of: (1) the functioning and impact of VC firms’ modes of internationalization; (2) micro‐level processes such as the functioning and decision making of international investment committees, or the development of international human and social capital; (3) the role of country institutions in VC internationalization and its real effects; and (4) the interplay of international VC with alternative financing sources.

Investment Cash Flow Sensitivity: The Role of Cash Flow Volatility

Low cash flow volatility firms receive stronger signals about future cash flow from a given cash flow shock, yielding a larger drop in demand for external finance and their cost of external finance, implying higher investment-cash flow sensitivities (ICFS). Empirical analysis in 6 European countries confirms this. Considering firms with the same cash flow volatility, ICFS are more pronounced for financially constrained firms (cf. Fazzari et al. (1988)). Considering firms with the same level of financial constraints, ICFS are more pronounced for firms with low cash flow volatility (cf. Kaplan and Zingales (1997)). The contradictory findings in the literature may be explained by cash flow volatility.

Funding shocks and banks' credit reallocation

This paper provides evidence on the strategic lending decisions made by banks facing a negative funding shock. Using bank-firm level credit data, we show that banks reallocate credit within their domestic loan portfolio in at least three different ways. First, banks reallocate to sectors where they have high sector presence. Second, they also reallocate to sectors in which they are heavily specialized. Third, they reallocate credit towards low-risk firms. These reallocation effects are economically large. A standard deviation improvement in sector presence, sector specialization or firm risk reduces the transmission of the funding shock to credit supply by 20, 13 and 10%, respectively. We also provide insight in the timing of these reallocation decisions. Reallocation to sectors in which a bank has a high sector presence is almost instantaneous, while sector specialization starts playing a role four to five months after the shock.