We test whether financial fluctuations affect firmsÕ decisions through their impact on banksÕ cost of funding. We exploit two shocks to Italian banksÕ CDS spreads and equity valuations: the 2007Ð 2009 financial crisis and the 2010Ð2012 sovereign debt crisis. Using newly available data...

Financial frictions represent a severe obstacle to firmsÕ innovativeness. This paper shows the existence and quantifies the effects of financial barriers to the innovation propensity of Italian SMEs. Employing direct measures of financial constraints and a credit-score estimated ad hoc, I find...