Demand for debt and equity before and after the financial crisis

Supply and demand responses to financial crises result in fluctuations in credit flow to the private sector. Policy makers concerned with the sustainability and growth of viable firms should disaggregate these responses. Utilising firm level data, this study investigates characteristics of firms applying for external finance before and after the financial crisis, along with characteristics of successful applicants. Notwithstanding changes in credit conditions, salient features of external financing demand endure across the period, including ownership, asset structure, age and size. Failure to secure debt in an earlier period does not deter firm owners from applying for loans in a subsequent period. Evidence suggests that the most financially distressed firms are suffering the greatest consequences of the credit crunch.

► This study examines characteristics of firms seeking finance before and after the financial crisis.
► Salient features of external financing demand endure across the period.
► Failure to secure debt does not deter firms from applying for loans in a subsequent period.
► The most financially distressed firms are suffering greatest consequences of the credit crunch.