EIB Working Paper 2025/02 - How do macroprudential policies affect corporate investment? Insights from EIBIS data

Abstract

Macroprudential policies aim to preserve financial stability by curbing excessive risk-taking in the financial system. As a knock-on effect, they can also impact investment activity by firms. This study uses firm-level data from the European Investment Bank Investment Survey (EIBIS) for the period 2015-2022 to investigate exactly how different kinds of firms and corporate investment are affected by such macroprudential policies. This analysis confirms that the tightening of macroprudential policies influences bank lending decisions and leads to a reduction in corporate investment. More specifically, the study shows that financially weaker banks are more likely to restrict credit in response to such tightening. Firms that are heavily reliant on external finance for investment, as well as those that are financially weaker, are more adversely affected by a reduced supply of credit supply. Investments in tangible assets are more strongly affected than investment in intangibles, as firms anyway find it harder to obtain credit finance for investments in intangibles assets.