60 Pages Posted: 24 Oct 2010 Last revised: 5 Dec 2015
Date Written: September 27, 2013
We study the transmission of bank distress to nonfinancial firms from 34 countries during the 2007-2009 financial crisis using systemic and bank-specific shocks. We find that bank distress is associated with equity valuation losses and investment cuts to borrower firms with the strongest lending relationships with banks. The losses are not offset by borrowers’ access to public debt markets and are concentrated in firms with the greatest information asymmetry problems and with the weakest financial positions. Our findings suggest that public debt markets do not mitigate the effects of relationship bank distress during financial crises.
Keywords: Lending Relationships, Bank Distress, Public Debt Markets, Financial Crisis
JEL Classification: G01, G21, G32
Suggested Citation: Suggested Citation
Carvalho, Daniel R. and Ferreira, Miguel A. and Matos, Pedro P., Lending Relationships and the Effect of Bank Distress: Evidence from the 2007-2009 Financial Crisis (September 27, 2013). Available at SSRN: https://ssrn.com/abstract=1696246 or http://dx.doi.org/10.2139/ssrn.1696246
By Amir Sufi