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Sovereign to Corporate Risk Spillovers

55 Pages Posted: 2 Jul 2012 Last revised: 20 Sep 2017

Patrick Augustin

McGill University, Desautels Faculty of Management

Hamid Boustanifar

BI Norwegian Business School

Johannes H. Breckenfelder

European Central Bank (ECB) - Financial Research

Jan Schnitzler

VU University Amsterdam - Faculty of Economics and Business Administration; Tinbergen Institute - Tinbergen Institute Amsterdam (TIA)

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Date Written: September 19, 2017

Abstract

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. The evidence is suggestive of risk spillovers from sovereign to corporate credit risk through a financial and a fiscal channel, as the effects are more pronounced for firms that are bank or government dependent. We find no support for indirect risk transmission through a deterioration of macroeconomic fundamentals.

Keywords: bailout, contagion, credit risk, Greece, risk transmission

JEL Classification: F34; F36; G15; H81; G12

Suggested Citation

Augustin, Patrick and Boustanifar, Hamid and Breckenfelder, Johannes H. and Schnitzler, Jan, Sovereign to Corporate Risk Spillovers (September 19, 2017). Available at SSRN: https://ssrn.com/abstract=2097391 or http://dx.doi.org/10.2139/ssrn.2097391

Patrick Augustin

McGill University, Desautels Faculty of Management ( email )

1001 Sherbrooke Street West
Quebec
Montreal, Quebec H3A 1G5
Canada

HOME PAGE: http://www.patrickaugustin.se

Hamid Boustanifar

BI Norwegian Business School ( email )

Oslo
Norway

Johannes H. Breckenfelder (Contact Author)

European Central Bank (ECB) - Financial Research ( email )

Sonnemannstrasse 20
D-60314 Frankfurt am Main
Germany

HOME PAGE: http://johannesbreckenfelder.eu/

Jan Schnitzler

VU University Amsterdam - Faculty of Economics and Business Administration ( email )

De Boelelaan 1105
Amsterdam, 1081HV
Netherlands

Tinbergen Institute - Tinbergen Institute Amsterdam (TIA) ( email )

Gustav Mahlerplein 117
Amsterdam, 1082 MS
Netherlands

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