Industry Heterogeneity in the Risk-Taking Channel
45 Pages Posted: 11 Jun 2020
Date Written: May 16, 2020
We examine the transmission of the risk-taking channel to different industries using syndicated loans to U.S. borrowers from 1984 to 2018. We find that a one percentage point decrease in the shadow rate increases loan spreads by more than 30 basis points in the mining & construction and manufacturing sectors. The equivalent effect is lower in the services and trade industries, whereas the effect on the transportation & utilities and finance industries is less pronounced. Our results survive in several sensitivity tests and are immune to time-varying demand-side explanations. The identified differences in the potency of the risk-taking channel explain a significant part of the inferior performance of highly affected sectors compared to less-affected sectors in the year after a loan origination.
Keywords: Bank risk-taking, Monetary policy, United States, Syndicated loans, Different industries
JEL Classification: G21, G01, E43, E52
Suggested Citation: Suggested Citation