Heterogeneity in the effects of bank lines of credit on capital investment efficiency

Abstract

This paper explores the effects of bank lines of credit on corporate investment efficiency. Credit lines impact capital investment efficiency by influencing fundamental growth opportunities and non-fundamental stock valuations in Tobin's Q. Furthermore, firms with credit lines reduce under-investment, contributing to an overall improvement in investment efficiency. Although credit lines enhance capital investment efficiency, their positive impact diminishes during economic downturns, low market sentiment, and stringent lending standards. Firms characterized by specific traits, such as high financial constraints, high leverage, and short operating cycles, tend to derive greater benefits in capital investment efficiency through access to credit lines.