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Please note that all times are shown in the time zone of the conference. The current conference time is: 16th June 2024, 05:08:27am EDT
Session Chair: Dirk Hackbarth, Boston University Questrom School of Business Discussant: Joshua Pierce, University of Alabama
Location:Room 1216
Presentations
The Epidemiology of Financial Constraints and Corporate Investment
William Grieser1, Ioannis Spyridopoulos2, Morad Zekhnini3
1Texas Christian University; 2American University; 3Michigan State university
We show that production networks amplify the effects of a firm’s financial constraints, generating substantive contagion effects on its partners’ investment. We quantify these effects via a network multiplier whereby a one-dollar drop in the constrained firm’s investment reduces total supply-chain investment by an additional dollar. To facilitate identification, we employ multiple financial-constraint measures, a Network Regression Discontinuity Design that accounts for covenant-violation spillovers, and an instrumented network of long-term partners. Consistent with production-driven spillovers, firms producing specific inputs generate larger investment spillovers and receive more trade credit. Overall, our results suggest that production networks aggregate firm-level financial frictions.