Abstract

https://ssrn.com/abstract=2587713
 


 



Bad Times, Good Credit


Bo Becker


Stockholm School of Economics; Centre for Economic Policy Research (CEPR)

Marieke Bos


Swedish House of Finance at the Stockholm School of Economics

Kasper Roszbach


Sveriges Riksbank (Bank of Sweden); University of Groningen,

November 5, 2016

Swedish House of Finance Research Paper No. 15-05

Abstract:     
Banks’ limited knowledge about borrowers’ creditworthiness constitutes an important friction in credit markets. Is this friction deeper in recessions, thereby contributing to cyclical swings in credit? Alternatively, is the depth of this friction reduced in recessions, as tough times reveal information about firm quality? We test these alternative hypotheses using internal ratings data from a large, Swedish bank. This banks’ ability to sort borrowers by credit quality is best in recessions, and worst in good times. Our results suggest that information frictions are counter-cyclical in corporate credit markets.

Number of Pages in PDF File: 53

Keywords: Credit markets, corporate loans, information frictions, business cycles

JEL Classification: G21, G30, E51


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Date posted: April 1, 2015 ; Last revised: November 6, 2016

Suggested Citation

Becker, Bo and Bos, Marieke and Roszbach, Kasper, Bad Times, Good Credit (November 5, 2016). Swedish House of Finance Research Paper No. 15-05. Available at SSRN: https://ssrn.com/abstract=2587713 or http://dx.doi.org/10.2139/ssrn.2587713

Contact Information

Bo Becker (Contact Author)
Stockholm School of Economics ( email )
Drottninggatan 98
Dept. of Finance
111 60 Stockholm, 11160
Sweden

Centre for Economic Policy Research (CEPR) ( email )
77 Bastwick Street
London, EC1V 3PZ
United Kingdom
Marieke Bos
Swedish House of Finance at the Stockholm School of Economics ( email )
Drottninggatan 98
111 60 Stockholm
Sweden
HOME PAGE: http://www.mariekebos.org

Kasper F. Roszbach
Sveriges Riksbank (Bank of Sweden) ( email )
Financial stability department
Stockholm, SE 103 37
Sweden
+46 8 787 0823 (Phone)
HOME PAGE: http://www.riksbank.se/research/roszbach

University of Groningen, ( email )
Department of Economics, Econometrics and Finance
Nettelbosje 2
Groningen, NL 9747 AE
Netherlands
HOME PAGE: http://www.rug.nl/staff/k.f.roszbach/
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