Identifying Credit Supply Shocks with Bank-Firm Data: Methods and Applications

51 Pages Posted: 3 Jun 2016 Last revised: 17 Mar 2018

See all articles by Hans Degryse

Hans Degryse

KU Leuven, Department Accounting, Finance and Insurance; Centre for Economic Policy Research (CEPR)

Olivier De Jonghe

Tilburg University - Department of Finance; National Bank of Belgium - Research Department; Tilburg University - European Banking Center

Sanja Jakovljević

Lancaster University - Department of Accounting and Finance

Klaas Mulier

Ghent University-Universiteit Gent - Faculty of Economics and Business Administration

Glenn Schepens

ECB -Financial Research Division

Date Written: March 13, 2018

Abstract

Current empirical methods to identify and assess the impact of bank shocks rely strictly on firms borrowing from multiple banks and ignore the many firms borrowing from only one bank. Yet, such single-relationship firms may be the most prone and sensitive to bank-loan supply shocks. Therefore, we develop time-varying cross-sectional measures of bank-loan supply that include these single-relationship firms. Using bank-firm matched credit data from Belgium for the period 2002-2012, we examine their information content and impact on firm outcomes and bank risk-taking. Our estimated supply shocks correlate significantly with interbank liabilities growth and bank lending standards. Firms borrowing from banks with negative supply shocks exhibit lower growth, investment and sales. Positive supply shocks are associated with bank risk-taking behaviour at the extensive margin. Importantly, in order to capture these effects in our sample, it is crucial to include the single-relationship firms in the identification of the supply shocks.

Keywords: credit supply identification, bank lending, corporate investments, bank risk-taking

JEL Classification: G21, G32

Suggested Citation

Degryse, Hans and De Jonghe, Olivier and Jakovljević, Sanja and Mulier, Klaas and Schepens, Glenn, Identifying Credit Supply Shocks with Bank-Firm Data: Methods and Applications (March 13, 2018). Available at SSRN: https://ssrn.com/abstract=2788512 or http://dx.doi.org/10.2139/ssrn.2788512

Hans Degryse (Contact Author)

KU Leuven, Department Accounting, Finance and Insurance ( email )

Naamsestraat 69
Leuven, B-3000
Belgium

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Olivier De Jonghe

Tilburg University - Department of Finance ( email )

P.O. Box 90153
Tilburg, 5000 LE
Netherlands
0031-13-466.2650 (Phone)

National Bank of Belgium - Research Department ( email )

Research Department
Boulevard de Berlaimont 14
B-1000 Brussels, 1000
Belgium

Tilburg University - European Banking Center ( email )

PO Box 90153
Tilburg, 5000 LE
Netherlands

Sanja Jakovljević

Lancaster University - Department of Accounting and Finance ( email )

Lancaster, Lancashire LA1 4YX
United Kingdom

Klaas Mulier

Ghent University-Universiteit Gent - Faculty of Economics and Business Administration ( email )

Ghent, B-9000
Belgium

Glenn Schepens

ECB -Financial Research Division ( email )

Frankfurt am Main
Germany

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