Working Paper: CEPR ID: DP16225
Authors: Miguel Ampudia; Thorsten Beck; Alexander Popov
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 andincrease 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.
Keywords: banking supervision; lending; investment; intangibles
JEL Codes: G21; G28
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Single Supervisory Mechanism (SSM) (E58) | Intangible Asset Investments (E22) |
| Single Supervisory Mechanism (SSM) (E58) | Tangible Asset Investments (G31) |
| Single Supervisory Mechanism (SSM) (E58) | Cash Holdings (G19) |
| Reduced Intangible Asset Investments (G31) | Labor Productivity (O49) |
| Reduced Intangible Asset Investments (G31) | Economic Growth (O49) |
| Single Supervisory Mechanism (SSM) (E58) | Investment Behavior (G11) |