The Impact of Bank Loan Terms on Intangible Investment in Europe (with A. Kolev and L. Maurin)

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Using European firm-level data from a new survey, we document the impact of bank loan terms on investment in intangible assets of non-financial corporations. We show that quantity rationing (i.e. granting loans of smaller size than requested) is the main factor hindering borrowers’ propensity to invest in intangible assets. Provided that firms are satisfied with their loan size; unfavorable rate, maturity and collateral requirements have no significant effects on the probability to invest in intangible assets. However, these terms do have a negative impact on the probability to invest in multiple intangibles simultaneously. Hence, inadequate loan terms, other than the size, undermine the possibility for firms to benefit from the complementarities of these assets (e.g. R\&D and training), which have been shown to be critical for firms’ productivity.