-
Views
-
Cite
Cite
Valentin Dimitrov, Sheri Tice, Corporate Diversification and Credit Constraints: Real Effects across the Business Cycle, The Review of Financial Studies, Volume 19, Issue 4, Winter 2006, Pages 1465–1498, https://doi.org/10.1093/rfs/hhj028
- Share Icon Share
Abstract
We study whether differences in access to credit cause focused firms to perform differently from diversified firms in the product market. Prior work has identified binding credit constraints for bank-dependent firms during recessions. We assess whether corporate diversification alleviates these constraints. We find that during recessions sales growth rates drop more for bank-dependent focused firms than for rival segments of bank-dependent diversified firms. We also find that during recessions inventory growth rates drop more for bank-dependent focused firms than for bank-dependent diversified firms even after we control for contemporaneous sales growth. Consistent with a credit constraint explanation, we find no difference in the sensitivities to recessions of bank-independent focused and bank-independent diversified firms. (JEL G30, G31, G32)