Do Bank Liquidity Shocks Hamper Firms’ Innovation?

Spatareanu, Mariana and Manole, Vlad and Kabiri, Ali Do Bank Liquidity Shocks Hamper Firms’ Innovation? International Journal of Industrial Organization, 67. ISSN 0167-7187 (Submitted)

[img] Text
Bank Distress and Firm innovation_RR_IJIO_June02_2019_BEAR.docx - Submitted Version
Restricted to Registered users only until 13 May 2021.
Available under License Creative Commons Attribution Non-commercial No Derivatives.

Download (132kB) | Request a copy

Abstract

This paper highlights the importance of bank-based finance for the innovation activity of UK firms. It identifies both theoretically and empirically how bank shocks affect firms’ innovation. We develop a theoretical model, and test its predictions using a new matched bank-firm-patent dataset for the UK. We find that bank distress during the 2008 and 2011 crises negatively affected firms’ innovation behavior. After carefully controlling for several potential biases in estimation we find that firms whose relationship banks were distressed not only patented less, but those patents were of lower technological value, less original and of lower quality. The negative effect is significantly larger in the case of small and medium size enterprises (SMEs). We also find that banks’ specialization in financing innovation mitigates the impact of bank distress on innovation.

Item Type: Article
Uncontrolled Keywords: innovation, bank distress, crisis
Subjects: H Social Sciences > HB Economic Theory
H Social Sciences > HG Finance
Divisions: School of Humanities > Economics and International Studies
Depositing User: Ali Kabiri
Date Deposited: 28 Jun 2019 14:02
Last Modified: 23 Aug 2019 07:51
URI: http://bear.buckingham.ac.uk/id/eprint/377

Actions (login required)

View Item View Item