{
  "title": "How Does Post-Crisis Bank Capital Adequacy Affect Firm Investment?",
  "publication": "IMF Working Papers, June 30, 2015",
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  "summary": "We examine the effect of bank capital levels on firm investment drawing on a sample of 11,106 non-financial firms from 2007 to 2013 in 16 advanced economies.",
  "sections": [
    {
      "heading": "Summary of study and sample",
      "content": "- Objective: Examine the effect of bank capital levels on firm investment.\n- Sample: 11,106 non-financial firms.\n- Period: 2007 to 2013.\n- Coverage: 16 advanced economies.\n- Bank capital measures analyzed: Tier 1 ratio and a simple leverage ratio."
    },
    {
      "heading": "Key empirical findings",
      "content": "- Firms with larger external financial needs invest relatively more when domestic financial systems have relatively high leverage ratios.\n- The positive association between high bank leverage ratios and firm investment is more pronounced for firms that have sound fundamentals.\n- Bank Tier 1 capital ratio does not appear to have a significant effect on corporate investment.\n  - Possible explanation offered: a higher Tier 1 ratio may also capture a high share of assets with low risk weights.\n- The empirical findings are robust to a range of specifications."
    },
    {
      "heading": "Interpretations and implications",
      "content": "- Bank balance sheets and banks’ willingness to extend credit can be an important factor in determining aggregate investment and growth outcomes.\n- Differences in the predictive power of leverage ratio versus Tier 1 ratio suggest that the choice of capital adequacy metric matters for assessing credit supply effects on investment."
    },
    {
      "heading": "Subject areas and keywords (as reported)",
      "content": "- Subjects: Bank credit; Banking; Capital adequacy requirements; Commercial banks; Financial crises; Financial institutions; Financial regulation and supervision; Loans; Money; Nonperforming loans.\n- Keywords: bank; Bank Capital Adequacy; Bank credit; bank Tier 1 capital ratio; Capital adequacy requirements; capital ratio; capital requirements; financial system index; Firm Investment; Global; lending decision; leverage ratio; Loans; Nonperforming loans; Tier 1; WP."
    },
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      "content": "- Authors: Yangfan Sun, Hui Tong.\n- Date: June 30, 2015.\n- Series: IMF Working Papers.\n- Issue/Working Paper No.: 2015/145.\n- Pages: 26.\n- DOI: https://doi.org/10.5089/9781513593593.001.\n- ISBN: 9781513593593.\n- ISSN: 1018-5941.\n\nSource: IMF Working Paper \"How Does Post-Crisis Bank Capital Adequacy Affect Firm Investment?\" by Yangfan Sun and Hui Tong (June 30, 2015).\n\n---\n\n Content in this bundle\n\n- wp15145\n  - wp15145 (Markdown version){rel=\"alternate\" type=\"text/markdown\"}\n  - wp15145 (PDF){rel=\"external\" type=\"application/pdf\"}\n\n---\n\nSource: https://www.imf.org/en/publications/wp/issues/2016/12/31/how-does-post-crisis-bank-capital-adequacy-affect-firm-investment-43041"
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    "Authors: Yangfan Sun, Hui Tong",
    "Published: June 30, 2015",
    "Series: IMF Working Papers",
    "DOI: https://doi.org/10.5089/9781513593593.001",
    "Objective: Examine the effect of bank capital levels on firm investment.",
    "Sample: 11,106 non-financial firms.",
    "Period: 2007 to 2013.",
    "Coverage: 16 advanced economies.",
    "Bank capital measures analyzed: Tier 1 ratio and a simple leverage ratio.",
    "Firms with larger external financial needs invest relatively more when domestic financial systems have relatively high leverage ratios.",
    "The positive association between high bank leverage ratios and firm investment is more pronounced for firms that have sound fundamentals.",
    "Bank Tier 1 capital ratio does not appear to have a significant effect on corporate investment.",
    "The empirical findings are robust to a range of specifications.",
    "Bank balance sheets and banks’ willingness to extend credit can be an important factor in determining aggregate investment and growth outcomes.",
    "Differences in the predictive power of leverage ratio versus Tier 1 ratio suggest that the choice of capital adequacy metric matters for assessing credit supply effects on investment.",
    "Subjects: Bank credit; Banking; Capital adequacy requirements; Commercial banks; Financial crises; Financial institutions; Financial regulation and supervision; Loans; Money; Nonperforming loans.",
    "Keywords: bank; Bank Capital Adequacy; Bank credit; bank Tier 1 capital ratio; Capital adequacy requirements; capital ratio; capital requirements; financial system index; Firm Investment; Global; lending decision; leverage ratio; Loans; Nonperforming loans; Tier 1; WP.",
    "Authors: Yangfan Sun, Hui Tong.",
    "Date: June 30, 2015.",
    "Series: IMF Working Papers.",
    "Issue/Working Paper No.: 2015/145.",
    "Pages: 26.",
    "DOI: https://doi.org/10.5089/9781513593593.001.",
    "ISBN: 9781513593593.",
    "ISSN: 1018-5941.",
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