This paper estimates the elasticity of substitution across lenders of Italian corporations, i.e. their ability to substitute loans obtained from one bank that changes its supply conditions with credit from other lenders. The paper also quantifies the impact of credit supply shocks on investment and shows that this impact depends on the different elasticities of substitution across industries
Credit supply shocks have a significant impact on corporate investment almost exclusively in the industries with the lowest substitution elasticity between banks. It is more difficult for firms in these industries to obtain funding or lower interest rates by moving to other banks. They are therefore more affected by the supply conditions of individual intermediaries. This finding is not influenced by the degree of bank specialization in each industry.
