OUT OF SIGHT, OUT OF MIND? GLOBAL VALUE CHAINS AND CREDIT ALLOCATION IN BAD TIMES

We investigate the influence of firms’ global status on the allocation of credit during a financial crisis. Using data on 15,000 businesses from seven European countries, we find that firms participating in global value chains were 25% less likely to be rationed by banks during the 2009 financial crisis. Matching the firm-level information with data on banks’ branch and subsidiary networks in the countries, we obtain that banks insulated global chain participants from credit rationing, not only accounting for the beneficial effects of global chain participation, but also to reduce spillovers on their own foreign activities related with global chains.