scholarly journals Disentangling the Effects of a Banking Crisis: Evidence from German Firms and Counties

2018 ◽  
Vol 108 (3) ◽  
pp. 868-898 ◽  
Author(s):  
Kilian Huber
Keyword(s):  
Economic Activity ◽  
Aggregate Demand ◽  
Banking Crisis ◽  
Bank Lending ◽  
Firm Level ◽  
Present Evidence ◽  
German Bank ◽  
Banking Relationships

Lending cuts by banks directly affect the firms borrowing from them, but also indirectly depress economic activity in the regions in which they operate. This paper moves beyond firm-level studies by estimating the effects of an exogenous lending cut by a large German bank on firms and counties. I construct an instrument for regional exposure to the lending cut based on a historic, postwar breakup of the bank. I present evidence that the lending cut affected firms independently of their banking relationships, through lower aggregate demand and agglomeration spillovers in counties exposed to the lending cut. Output and employment remained persistently low even after bank lending had normalized. Innovation and productivity fell, consistent with the persistent effects. (JEL E32, E44, G01, G21, G32, R11, R23)

scholarly journals The Employment Effects of Credit Market Disruptions: Firm-level Evidence from the 2008–9 Financial Crisis *

2013 ◽  
Vol 129 (1) ◽  
pp. 1-59 ◽  
Author(s):  
Gabriel Chodorow-Reich
Keyword(s):  
Bank Lending ◽  
Firm Level ◽  
Data Set ◽  
Employment Effects ◽  
Lower Likelihood ◽  
Banking Relationships ◽  
Firm Type ◽  
Employment Decline ◽  
Nonfinancial Firms ◽  
Medium Firms

Abstract This article investigates the effect of bank lending frictions on employment outcomes. I construct a new data set that combines information on banking relationships and employment at 2,000 nonfinancial firms during the 2008–9 crisis. The article first verifies empirically the importance of banking relationships, which imply a cost to borrowers who switch lenders. I then use the dispersion in lender health following the Lehman crisis as a source of exogenous variation in the availability of credit to borrowers. I find that credit matters. Firms that had precrisis relationships with less healthy lenders had a lower likelihood of obtaining a loan following the Lehman bankruptcy, paid a higher interest rate if they did borrow, and reduced employment by more compared to precrisis clients of healthier lenders. Consistent with frictions deriving from asymmetric information, the effects vary by firm type. Lender health has an economically and statistically significant effect on employment at small and medium firms, but the data cannot reject the hypothesis of no effect at the largest or most transparent firms. Abstracting from general equilibrium effects, I find that the withdrawal of credit accounts for between one-third and one-half of the employment decline at small and medium firms in the sample in the year following the Lehman bankruptcy.

Economic effects of monetary policy in Russia: What do large datasets tell us?

2020 ◽  
pp. 31-53 ◽  
Author(s):  
Anna A. Pestova ◽  
Natalia A. Rostova
Keyword(s):  
Monetary Policy ◽  
Interest Rate ◽  
Interest Rates ◽  
Economic Activity ◽  
Global Financial Crisis ◽  
Exchange Rate Regime ◽  
Aggregate Demand ◽  
Economic Effects ◽  
Theoretical Concepts ◽  
Empirical Estimates

Is the Bank of Russia able to control inflation and, at the same time, manage aggregate demand using its interest rate instruments? In other words, are empirical estimates of the effects of monetary policy in Russia consistent with the theoretical concepts and experience of advanced economies? This paper is aimed at addressing these issues. Unlike previous research, we employ “big data” — a large dataset of macroeconomic and financial data — to estimate the effects of monetary policy in Russia. We focus exclusively on the period after the 2008—2009 global financial crisis when the Bank of Russia announced the abandoning of its fixed ruble exchange rate regime and started to gradually transit to an interest rate management. Our estimation results do not confirm standard responses of key economic activity and price variables to tightening of monetary policy. Specifically, our estimates do not reveal a statistically significant restraining effect of the Bank of Russia’s policy of high interest rates on inflation in recent years. At the same time, we find a significant deteriorating effect of the monetary tightening on economic activity indicators: according to our conservative estimates, each of the key rate increases occurred in March and December 2014 had led to a decrease in the industrial production index by about 0.2 percentage points within a year.

Credit supply shocks and the Great Depression in Germany

2020 ◽  
Author(s):  
Max Breitenlechner ◽  
Daniel Gründler ◽  
Gabriel P Mathy ◽  
Johann Scharler
Keyword(s):  
Great Depression ◽  
Aggregate Demand ◽  
Banking Crisis ◽  
Expansion Phase ◽  
Vector Autoregressive ◽  
Credit Supply ◽  
The Great Depression ◽  
Supply Shocks ◽  
Structural Vector Autoregressive Model ◽  
Structural Vector

Abstract At the peak of the Great Depression in mid-1931, Germany experienced a severe banking crisis. We study to what extent credit constraints contributed to the downturn by fitting a structural vector autoregressive model with data from January 1925 to September 1935. Adverse credit supply shocks contributed strongly to the downturn especially at the time of the 1931 banking crisis. Before that, credit supply shocks had also contributed to the expansion phase preceding the depression. We also find that aggregate demand and U.S. business cycle shocks were the primary drivers of the German Great Depression.

scholarly journals Corporate Resilience to Banking Crises: The Roles of Trust and Trade Credit

2018 ◽  
Vol 53 (4) ◽  
pp. 1441-1477 ◽  
Author(s):  
Ross Levine ◽  
Chen Lin ◽  
Wensi Xie
Keyword(s):  
Trade Credit ◽  
Social Trust ◽  
Bank Lending ◽  
Banking Crises ◽  
Bank Lending Channel ◽  
Firm Level ◽  
Informal Finance ◽  
Lending Channel ◽  
Level Data ◽  
Corporate Profits

Are firms more resilient to systemic banking crises in economies with higher levels of social trust? Using firm-level data in 34 countries from 1990 through 2011, we find that liquidity-dependent firms in high-trust countries obtain more trade credit and suffer smaller drops in profits and employment during banking crises than similar firms in low-trust economies. The results are consistent with the view that when banking crises block the normal bank-lending channel, greater social trust facilitates access to informal finance, cushioning the effects of these crises on corporate profits and employment.

Slowdown in Bank Credit Growth: Aggregate Demand or Bank Non-performing Assets?

2018 ◽  
Vol 12 (3) ◽  
pp. 257-275 ◽  
Author(s):  
Ashima Goyal ◽  
Akhilesh Verma
Keyword(s):  
Interest Rates ◽  
Aggregate Demand ◽  
Balance Sheet ◽  
Bank Lending ◽  
Jel Classification ◽  
Capital Adequacy ◽  
Credit Growth ◽  
Bank Ownership ◽  
Negative Effect ◽  
Asset Quality

We estimate the determinants of credit and of non-performing assets (NPAs) using a firm and a bank panel with data up to 2015 in order to test bank lending against the aggregate demand channel as an explanation for slow Indian credit growth. The results support demand as the key constraint. Only demand variables affect corporate credit for a broad set of firms. Balance sheet weakness reduced credit only for a narrow subset of indebted firms in a difference-in-difference type analysis. Even so, sales remained the dominant variable. From the bank panel, the asset quality review (AQR) did have a strong negative effect on advances but gross NPAs did not. While high interest rates and low growth raised NPAs, so did past credit. Low demand not only reduced credit, it also increased NPAs. That the capital adequacy ratio (CAR) significantly reduces NPAs points to the productivity of fund infusion. When other determinants are controlled, bank ownership does not affect NPA ratios, again supporting external shocks as causal. The results suggest that apart from structural reform to clean balance sheets, recovery of demand is necessary for revival of credit growth. JEL Classification: G21, E51

Multiple banking relationships, agency costs and firm value: evidence from India

2019 ◽  
Vol 46 (1) ◽  
pp. 1-18 ◽  
Author(s):  
Nemiraja Jadiyappa ◽  
Bhanu Sireesha ◽  
L. Emily Hickman ◽  
Pavana Jyothi
Keyword(s):  
Firm Value ◽  
Fixed Effects ◽  
Emerging Market ◽  
Negative Relationship ◽  
Bank Lending ◽  
Free Rider ◽  
Content Type ◽  
Free Rider Problem ◽  
Banking Relationships ◽  
Prior Literature

Purpose Prior literature demonstrates that the effectiveness of bank monitoring decreases when multiple banks are involved, due to a free rider problem, leading to lower firm value. The purpose of this paper is to investigate whether this free rider problem exists in an emerging market context, and whether the relationship between multiple banking relationships and firm value is conditioned on bankers’ incentives to monitor. Design/methodology/approach The authors use multivariate panel regression to examine the hypotheses. The conditioning effect of the incentive to govern (the amount of average bank lending) is modeled using an interaction variable. Based on the result of the Hausman test, the authors employ two-way fixed effects estimator to estimate the coefficients. Findings First, the negative relationship between multiple banking relationships and firm value holds true among Indian firms. Second, the authors show that this negative relationship is lessened for firms with high average bank debt or higher free cash flows. The analyses suggest that these moderating effects are related to a reduction in the free rider problem rather than a decrease in financial constraints. However, these results are only significant among larger firms. Originality/value Prior literature has not considered the conditioning impact of the “incentives to govern” when examining the free rider problem, inherent in situations where multiple actors are involved. The authors show in this study that the free rider problem disappears when the incentives to govern are considered in the overall research framework.

scholarly journals A microanalysis of trade finance: German bank entry and coffee exports in Brazil, 1880–1913

2019 ◽  
Vol 24 (2) ◽  
pp. 356-389
Author(s):  
Wilfried Kisling
Keyword(s):  
Historical Perspective ◽  
Credit Constraints ◽  
Original Data ◽  
Firm Level ◽  
Data Set ◽  
Trade Finance ◽  
German Bank ◽  
Level Data ◽  
Economic Studies ◽  
Bank Entry

Abstract The trade-finance nexus has enjoyed increasing interest in recent economic studies, but empirical evidence is scarce and studies from a historical perspective seem missing. This study analyses the effect of German bank entry on Brazilian coffee exports between 1880 and 1913 using firm-level data. I create an original data set on the yearly quantities of exported coffee and the credit received from the German Brasilianische Bank für Deutschland by export houses in Brazil. Using a difference-in-difference approach, I find that Brasilianische eased previously existing credit constraints, and that companies financed by Brasilianische exported significantly more than those that were not.

The Financial Crisis, Bank Lending and UK Productivity: Sectoral and Firm-Level Evidence

2014 ◽  
Vol 228 ◽  
pp. R17-R34 ◽  
Author(s):  
Rebecca Riley ◽  
Chiara Rosazza-Bondibene ◽  
Garry Young
Keyword(s):  
Productivity Growth ◽  
Banking Sector ◽  
Bank Lending ◽  
Supply Side ◽  
Firm Level ◽  
Industrial Sectors ◽  
Key Factor ◽  
The Uk ◽  
Holding Back ◽  
Reallocation Of Resources

This paper assesses the evidence and investigates some of the mechanisms by which the most recent banking sector crisis might have affected the supply side of the UK economy. We find clear evidence that the banking sector crisis affected credit supply to businesses and caused bank lending to decline. But we do not find much evidence of the heterogeneity in performance between different industrial sectors that would have been expected if banking sector impairment had been the key factor holding back productivity growth. Consistent with this we do not find strong evidence that a lack of reallocation of resources across businesses has been a substantial drag on productivity growth.

scholarly journals The COVID-19 outbreak and its impact on business establishments: a study on challenges and strategic approaches

2021 ◽  
Vol 58 (1&2) ◽  
pp. 185-213
Author(s):  
Aurora Hidalgo ◽  
Viory Yvonne Janeo ◽  
Winston Conrad Padojinog ◽  
Cid Terosa ◽  
Peter L. U ◽  
...  
Keyword(s):  
Online Survey ◽  
Negative Impact ◽  
Aggregate Demand ◽  
Health And Safety ◽  
The Philippines ◽  
Firm Level ◽  
Safety Standards ◽  
Business Operations ◽  
Survey Results ◽  
The Impact

The Management Association of the Philippines (MAP) commissioned the School of Economics of the University of Asia and the Pacific (UA&P) to conduct a study aimed at understanding the impact of the COVID-19 outbreak on various industry sectors and to draw possible policy measures for both government and private institutions to help the affected sectors deal with the pandemic’s negative effects and gradually return to stable business operations. An online survey of pre-selected thirty-three (33) representatives from key priority sectors which recorded sharp contractions in the first two quarters of 2020 and which had a share to GDP of above 1 percent was conducted. To validate the survey results, stakeholder interviews were also conducted with more than 10 firms via the zoom video conferencing platform. The survey results confirmed the negative impact of the pandemic at the firm-level (i.e., decrease in employee compensation, decline in headcount, loss of revenue and other liquidity crunches, prolonged collection periods, problems in logistics, delayed or cancelled projects and disrupted supply chains and access to labor; among others). Some have had to close branches or altogether cease operations. The sudden and likely permanent shift towards digitization of operations has disrupted operations and exerted pressure to digitally transform business operations in order to survive in the so-called “new normal.” Moreover, this requires investments in equipment and training. Additional costs and investments are also needed to meet health and safety standards and protocols. Thus, required assistance commonly cited by firms were loans, subsidies, and tax relief In the short term, the national government must restore consumer confidence and deploy its fiscal powers to stimulate aggregate demand. With assistance, business can invest in platforms and meeting health and safety protocols for workers and customers to return to work and patronize their business, whether on site or online. Resuscitating the economy is not solely the responsibility of government. It also requires solidarity and coordinated response from the private sector. Over the long term, both government and business must build more resilient organizations and strategies. This would include adopting digital transformation by both private and public sectors for a more nimble and agile economy. Business may also revisit the concept of “coopetition”. The interconnectedness of each industry calls for a more collaborative approach among businesses. When firms who have been negatively affected by the pandemic recover, this can also increase the rate at which the economy bounces back.

scholarly journals The development of bank lending to corporate clients in Ukraine in times of economic cycles

2017 ◽  
pp. 72-87 ◽  
Author(s):  
Yaroslav Chaikovskyi
Keyword(s):  
Interest Rates ◽  
Economic Activity ◽  
Bank Lending ◽  
Bank Loans ◽  
Bank Loan ◽  
Economic Activities ◽  
Economic Cycles ◽  
Loan Portfolios ◽  
Major Factors ◽  
Corporate Clients

The article considers bank lending to corporate clients in Ukraine overcoming the issues related to economic cycles. The dynamics of gross domestic product, total assets, and credit portfolios of Ukraine’s banks over the period between 2012 and 2016 is analyzed. The changes in the composition of bank loans to non-financial corporations are analyzed in terms of scheduled payments, forms of currencies, target allocation and economic activities. Additionally, the dynamics and composition of residents’ deposits mobilized by deposit-taking corporations are considered in terms of scheduled payments over the above period. The major factors that hinder the recovery of bank lending to corporate clients are identified. It is highlighted that the main obstacles to the development of banking lending to corporate clients in Ukraine in times of economic cycles are as follows: high interest rates; a significant percentage of unprofitable enterprises and loan arrears in bank loan portfolios; an increase of non-performing loans (NPL); the fact that banks, having sufficient liquidity for lending to economy-boosting projects, prefer to purchase government securities; corrupt practices of granting loans to affiliated companies (insider loans). The percentage of unprofitable enterprises in Ukraine in 2016 is determined and analyzed by type of economic activity. Based on the analysis performed, some assumptions are made about the trends of the development of bank lending to corporate clients in Ukraine and proposals on further harmonization of bank lending to corporate clients in times of economic cycles are set out.

Sign in / Sign up

Export Citation Format

Share Document