Out with the New, in with the Old? Bank Supervision and the Composition of Firm Investment

57 Pages Posted: 14 Jul 2021

See all articles by Miguel Ampudia

Miguel Ampudia

European Central Bank (ECB) - Directorate General Research

Thorsten Beck

City University London - Sir John Cass Business School; European University Institute; Centre for Economic Policy Research (CEPR)

Alexander A. Popov

European Central Bank (ECB)

Date Written: June 1, 2021

Abstract

Using exogenous variation generated by the creation of the Single Supervisory Mechanism (SSM) in the euro area, we find that relative to firms borrowing from banks remaining under national supervision, firms borrowing from SSM-supervised banks reduce intangible assets and increase tangible assets and cash holdings. These effects do not pre-date the supervisory reform, do not obtain in non-SSM jurisdictions, and coincide with reductions in long-term debt and labor productivity. The reallocation of investment away from intangible assets is stronger in innovation-intensive sectors, suggesting that centralized bank supervision can slow down the shift from the capital-based to the knowledge-based economy

JEL Classification: G21, G28

Suggested Citation

Ampudia, Miguel and Beck, Thorsten and Popov, Alexander A., Out with the New, in with the Old? Bank Supervision and the Composition of Firm Investment (June 1, 2021). CEPR Discussion Paper No. DP16225, Available at SSRN: https://ssrn.com/abstract=3886667

Miguel Ampudia (Contact Author)

European Central Bank (ECB) - Directorate General Research ( email )

Kaiserstrasse 29
D-60311 Frankfurt am Main
Germany

Thorsten Beck

City University London - Sir John Cass Business School ( email )

106 Bunhill Row
London, EC1Y 8TZ
United Kingdom

European University Institute

Villa Schifanoia
133 via Bocaccio
Firenze (Florence), Tuscany 50014
Italy

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Alexander A. Popov

European Central Bank (ECB) ( email )

Sonnemannstrasse 22
Frankfurt am Main, 60314
Germany

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