57 Pages Posted: 2 Jul 2012 Last revised: 16 May 2016
Date Written: April 27, 2016
The first Greek bailout on April 11, 2010 triggered a significant reevaluation of sovereign credit risk across Europe. We exploit this event to examine the transmission of sovereign to corporate credit risk. A ten percent increase in sovereign credit risk raises corporate credit risk on average by 1.1 percent after the bailout. These effects are more pronounced in countries that belong to the Eurozone and that are more financially distressed. Bank dependence, public ownership, and the sovereign ceiling are channels that enhance the risk transmission. The empirical evidence is suggestive of risk spillovers from sovereign to corporate credit risk.
Keywords: bailout, contagion, credit risk, Greece, risk transmission
JEL Classification: F34; F36; G15; H81; G12
Suggested Citation: Suggested Citation
Augustin, Patrick and Boustanifar, Hamid and Breckenfelder, Johannes H. and Schnitzler, Jan, Sovereign to Corporate Risk Spillovers (April 27, 2016). Available at SSRN: https://ssrn.com/abstract=2097391 or http://dx.doi.org/10.2139/ssrn.2097391