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Cbkp_redit cycles and corporate investment: Direct tests using survey data on banks' lending practices

Abstract:

Microeconomic studies have found cash flow to be important for the investment decision and this result is often interpreted as evidence of adverse selection in cbkp_redit markets. Using direct survey evidence on banks' willingness to lend, this research examines the role of cbkp_redit in the investment decision while allowing for cash-flow, Tobin's q, income, uncertainty and default risks. Regression analysis reveals that banks' willingness to lend, income and uncertainty are the key drivers of cyclical fluctuations in corporate investment. These results have important implications for the conduct of monetary policy as well as research on business cycles. © 2012.