Identifying credit supply shocks with bank-firm data:Methods and applications

Degryse, Hans and De Jonghe, Olivier and Jakovljević, Sanja and Mulier, Klaas and Schepens, Glenn (2019) Identifying credit supply shocks with bank-firm data:Methods and applications. Journal of Financial Intermediation, 40. ISSN 1042-9573

[img]
Text (Jakovljevic - JFI 2019 Accepted Manuscript)
Jakovljevic_JFI_2019_Accepted_Manuscript.pdf - Accepted Version
Available under License Creative Commons Attribution-NonCommercial-NoDerivs.

Download (1MB)

Abstract

Current empirical methods to identify and assess the impact of bank credit supply shocks rely strictly on multi-bank firms and ignore firms borrowing from only one bank. Yet, these single-bank firms are often the majority of firms in an economy and most prone to credit supply shocks. We propose and underpin an alternative demand control (using industry–location–size–time fixed effects) that allows identifying time-varying cross-sectional bank credit supply shocks using both single- and multi-bank firms. Using matched bank-firm credit data from Belgium, we show that firms borrowing from banks with negative credit supply shocks exhibit lower financial debt growth, asset growth, investments, and operating margin growth. Positive credit supply shocks are associated with bank risk-taking behaviour at the extensive margin. Importantly, to capture these effects it is crucial to include the single-bank firms when identifying the bank credit supply shocks.

Item Type:
Journal Article
Journal or Publication Title:
Journal of Financial Intermediation
Additional Information:
This is the author’s version of a work that was accepted for publication in Journal of Financial Intermediation. Changes resulting from the publishing process, such as peer review, editing, corrections, structural formatting, and other quality control mechanisms may not be reflected in this document. Changes may have been made to this work since it was submitted for publication. A definitive version was subsequently published in Journal of Financial Intermediation, 40, 2019 DOI: 10.1016/j.jfi.2019.01.004
Uncontrolled Keywords:
/dk/atira/pure/subjectarea/asjc/2000/2002
Subjects:
ID Code:
133775
Deposited By:
Deposited On:
22 Jun 2019 09:12
Refereed?:
Yes
Published?:
Published
Last Modified:
30 Oct 2020 06:16