We examine how shocks to banks’ financial conditions impact corporate financing and investment decisions using the 2007-2009 financial crisis as an experimental setting. We find that average firms relied more heavily on bank credit during the crisis. However, firms whose banks incurred a larger amount of nonperforming loans reduced their bank credit during the crisis. Their reduction on bank debt weren’t replaced by alternative credit such as public debt or trade credit. Firms with more adversely affected banks also invest less and hoard more cash during the crisis compared to their precrisis level. Overall, our results suggest that adverse shocks on the banking system can curtail bank lending and negatively affect the real sector.
The Effect of Bank Shocks on Corporate Financing and Investment: Evidence from 2007-2009 Financial Crisis”.
GIACOMINI, EMANUELA;
2014-01-01
Abstract
We examine how shocks to banks’ financial conditions impact corporate financing and investment decisions using the 2007-2009 financial crisis as an experimental setting. We find that average firms relied more heavily on bank credit during the crisis. However, firms whose banks incurred a larger amount of nonperforming loans reduced their bank credit during the crisis. Their reduction on bank debt weren’t replaced by alternative credit such as public debt or trade credit. Firms with more adversely affected banks also invest less and hoard more cash during the crisis compared to their precrisis level. Overall, our results suggest that adverse shocks on the banking system can curtail bank lending and negatively affect the real sector.I documenti in IRIS sono protetti da copyright e tutti i diritti sono riservati, salvo diversa indicazione.
