Beyond internal capital markets: The in-house transmission of adverse sales shocks and the collateral channel

Yuk Ying Chang; Sudipto Dasgupta

doi:10.1016/j.jcorpfin.2007.02.001

Beyond internal capital markets: The in-house transmission of adverse sales shocks and the collateral channel

Yuk Ying Chang, Sudipto Dasgupta^*

^*Corresponding author for this work

Research output: Contribution to journal › Journal Article › peer-review

3 Citations (Scopus)

Abstract

We study how shocks to some business segments affect investment in a firm's non-shock segments. We find that subsequent investment in the non-shock segments is significantly lower compared to segments of firms that do not experience shocks. Surprisingly, lower availability of internal funds does not account for the lower investment. We find that segment shocks propagate within the firm by decreasing the value of collateral assets and reducing the availability of external finance. Our results support the operation of an external finance collateral channel ([Kiyotaki, N., Moore, J., 1997. Credit cycles. Journal of Political Economy 105, 211-248.]) previously discussed in the literature.

Original language	English
Pages (from-to)	743-770
Number of pages	28
Journal	Journal of Corporate Finance
Volume	13
Issue number	5
DOIs	https://doi.org/10.1016/j.jcorpfin.2007.02.001
Publication status	Published - Dec 2007
Externally published	Yes

Keywords

Collateral channel
Internal capital markets
Transmission mechanism

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10.1016/j.jcorpfin.2007.02.001

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title = "Beyond internal capital markets: The in-house transmission of adverse sales shocks and the collateral channel",

abstract = "We study how shocks to some business segments affect investment in a firm's non-shock segments. We find that subsequent investment in the non-shock segments is significantly lower compared to segments of firms that do not experience shocks. Surprisingly, lower availability of internal funds does not account for the lower investment. We find that segment shocks propagate within the firm by decreasing the value of collateral assets and reducing the availability of external finance. Our results support the operation of an external finance collateral channel ([Kiyotaki, N., Moore, J., 1997. Credit cycles. Journal of Political Economy 105, 211-248.]) previously discussed in the literature.",

keywords = "Collateral channel, Internal capital markets, Transmission mechanism",

author = "Chang, \{Yuk Ying\} and Sudipto Dasgupta",

year = "2007",

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T1 - Beyond internal capital markets

T2 - The in-house transmission of adverse sales shocks and the collateral channel

AU - Chang, Yuk Ying

AU - Dasgupta, Sudipto

PY - 2007/12

Y1 - 2007/12

N2 - We study how shocks to some business segments affect investment in a firm's non-shock segments. We find that subsequent investment in the non-shock segments is significantly lower compared to segments of firms that do not experience shocks. Surprisingly, lower availability of internal funds does not account for the lower investment. We find that segment shocks propagate within the firm by decreasing the value of collateral assets and reducing the availability of external finance. Our results support the operation of an external finance collateral channel ([Kiyotaki, N., Moore, J., 1997. Credit cycles. Journal of Political Economy 105, 211-248.]) previously discussed in the literature.

AB - We study how shocks to some business segments affect investment in a firm's non-shock segments. We find that subsequent investment in the non-shock segments is significantly lower compared to segments of firms that do not experience shocks. Surprisingly, lower availability of internal funds does not account for the lower investment. We find that segment shocks propagate within the firm by decreasing the value of collateral assets and reducing the availability of external finance. Our results support the operation of an external finance collateral channel ([Kiyotaki, N., Moore, J., 1997. Credit cycles. Journal of Political Economy 105, 211-248.]) previously discussed in the literature.

KW - Collateral channel

KW - Internal capital markets

KW - Transmission mechanism

UR - https://www.webofscience.com/wos/woscc/full-record/WOS:000251930100005

UR - https://openalex.org/W2165102752

UR - https://www.scopus.com/pages/publications/36349003511

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DO - 10.1016/j.jcorpfin.2007.02.001

M3 - Journal Article

SN - 0929-1199

VL - 13

SP - 743

EP - 770

JO - Journal of Corporate Finance

JF - Journal of Corporate Finance

IS - 5

ER -

Beyond internal capital markets: The in-house transmission of adverse sales shocks and the collateral channel

Abstract

Keywords

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