Essays on Corporate Finance

This doctoral dissertation consists of four chapters that cover a range of topics in corporate finance. Specifically, this dissertation (i) reviews the literature on the real effects of banks' credit supply shocks, (ii) investigates the effect of firing costs on firm productivity, (iii) examines the allocation of loans with public guarantees during the COVID-19 pandemic and the resulting real effects, and (iv) studies the effect of bank specialization on borrower performance. The first chapter reviews the rapidly growing literature on the real effects of banks' corporate credit supply. We cover recent methodological advances and provide an in-depth survey of the existing evidence. The literature consistently shows that credit supply contractions lead to adverse real outcomes, but economic magnitudes vary across samples and identification strategies. This variation has become smaller in more recent work, using highly granular data. We further document heterogeneity in firm outcomes and show that the evidence is more ambiguous for expansionary shocks. Our analysis allows us to identify current knowledge gaps and worthwhile avenues for future research. In the second chapter, we investigate the effect of firing costs on total factor productivity (TFP) and resource allocation, exploiting a legal change in Belgium that has induced heterogeneous changes in firing costs across employee types. We find that increased firing costs reduce firm-level TFP. They further change the composition of the workforce towards employee types whose firing costs have relatively decreased, strongly reduce job flows, and increase employee outsourcing and hours worked. We find no evidence of capital-intensive technology adoption. Using loan data from the Belgian credit register, we also show that the decline in TFP is smaller for firms with better access to credit. The third chapter studies the financial and real effects of the Belgian loan guarantee program implemented after the onset of the COVID-19 pandemic. The unique feature of the program, coupled with unique loan-level data from the Belgian credit register, allows us to observe the outcomes of the eligible loan applications. We document that riskier firms were more likely to obtain guaranteed loans, which were also partly used to substitute for existing non-guaranteed debt. At the same time, banks allocated non-guaranteed credit to their more important borrowers so that those borrowers did not have to pay the guarantee fee. Our