Firm or Bank Weakness? Access to Finance Since the European Sovereign Debt Crisis
44 Pages Posted: 10 Jan 2020
Date Written: January, 2020
This paper uses a unique dataset where credit rejections experienced by euro area firms are matched with firm and bank characteristics. This allows us to study simultaneously the role that bank and firm weakness had in the credit reduction observed in the euro area during the sovereign debt crisis, and in credit developments characterising the post-crisis recovery. Compared with the existing literature matching borrowers’ and lenders’ characteristics, our dataset provides a better representation of euro area firms of small and medium size. Our findings suggest that, while firm balance sheet factors have been strong determinants of credit rejections, in the crisis period bank weakness made it harder to obtain external finance for firms located in stressed countries of the euro area.
Keywords: bank lending, credit crunch, credit supply, European sovereign debt crisis
JEL Classification: E44, F36, G01, G21
Suggested Citation: Suggested Citation