Firms’ Expectations on the Availability of Credit Since the Financial Crisis

Ferrando, Annalisa; Ganoulis, Ioannis; Preuss, Carsten

doi:10.2139/ssrn.3515395

Cited by 2 publications

(1 citation statement)

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“…Specifically, firms' expectations are an essential factor determining the business cycle phases, making them essential for economic activity (Gennaioli and Schleifer, 2018). Studying firms' expectations on the availability of external (bank) finance is crucial given the significant impact they have on firms' future investment and hiring decisions (Ferrando et al , 2019). Given the importance of firms' expectations, a natural research question arises: how do firms shape their expectations on the availability of external finance?…”

Section: Introductionmentioning

confidence: 99%

Are firms' expectations on the availability of external finance rational, adaptive or regressive?

Anastasiou

Giannoulakis

2021

JES

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PurposeThis study investigates which expectation formation mechanism governs Eurozone firms regarding their expectations on external finance availability.Design/methodology/approachIn this study, we link consecutive surveys from the Survey on the Access to Finance of Enterprises to bring new evidence on how non-financial corporations shape their expectations on external finance availability.FindingsIn line with the past literature, we demonstrate that the data reject the Rational Expectations hypothesis, and we find evidence in favor of the Adaptive Expectation mechanism.Originality/valueThis is the first study studying firms' expectations of external finance availability, implementing survey data of firms' expectations from the SAFE database on a country level. The formation of firm expectations is vital in directing policymakers in designing appropriate monetary policies, as both the employment and inflation targets of central banks around the world are highly dependent on the firm-level decision process.

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Section: Introductionmentioning

confidence: 99%