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Credit supply constraints and financial policies of listed companies during the 2007–2009 financial crisis

Akbar, Saeed; Rehman, Shafiq ur; Liu, Jia; Shah, Syed Zulfiqar Ali


Saeed Akbar

Shafiq ur Rehman

Jia Liu

Syed Zulfiqar Ali Shah


© 2017 Elsevier B.V. This study examines the effects of lending constraints on the financial policies of UK publicly listed companies during the 2007–2009 financial crisis. Using a sample of 2039 publicly listed firms, the results of our analysis indicate that financial policies of firms are sensitive to variations in the supply of external finance and credit, suggesting that liquidity-constraint firms with low cash reserves suffered more at the time of the credit crunch. While managing through the potential negative effects of the financial crisis, majority of the sample companies increased the use of internal finance and deferred the payments of dividends which helped them apply effective financial policies during the crisis period. The findings of this study also document that during the crisis period, financial policies of firms were exposed to variations in the supply of finance and credit, which, by implication, posed a threat to their operations, sustainability and growth. Our findings produce awareness about the negative effects of the non-availability of external finance and credit supply to listed companies, and signify the role of different financing channels and credit system in the operations and growth of listed companies. These findings have implications for financial regulation and policy making in the UK.


Akbar, S., Rehman, S. U., Liu, J., & Shah, S. Z. A. (2017). Credit supply constraints and financial policies of listed companies during the 2007–2009 financial crisis. Research in international business and finance, 42, 559-571.

Journal Article Type Article
Acceptance Date Jul 3, 2017
Online Publication Date Jul 8, 2017
Publication Date 2017-12
Deposit Date Sep 18, 2018
Publicly Available Date Oct 27, 2022
Journal Research in International Business and Finance
Print ISSN 0275-5319
Publisher Elsevier
Peer Reviewed Peer Reviewed
Volume 42
Pages 559-571
Keywords Financial crisis; Financial policies; Financial management; Total debt; Trade credit; Credit crunch
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