Large Banks and Systemic Spillovers

58 Pages Posted: 18 Feb 2021

See all articles by Christian T. Lundblad

Christian T. Lundblad

University of North Carolina Kenan-Flagler Business School; Frank Hawkins Kenan Institute of Private Enterprise

Jitao Ou

Hong Kong Baptist University

Zhongyan Zhu

Monash University

Date Written: December 29, 2020

Abstract

What are the spillover effects when central financial institutions with dominant market shares simultaneously halt their liquidity creation and risk transformation roles? To shed light on this question, we build a novel, comprehensive dataset. Firms without a history of debt financing exhibit limited exposure to a systemic event. For firms that rely on external debt financing, their exposures are mainly driven by pre-existing connections to these central financial institutions. Further, having multiple bank connections or access to public debt issuance does not mitigate systemic exposures. The often-hypothesized diversification channels appear to be limited when central institutions are collectively constrained.

Keywords: bank risk-taking, regulatory capital, lending channel, systemic risk, and syndicated debt offering

JEL Classification: G21, G23, G24, G28

Suggested Citation

Lundblad, Christian T. and Ou, Jitao and Zhu, Zhongyan, Large Banks and Systemic Spillovers (December 29, 2020). Available at SSRN: https://ssrn.com/abstract=3782771 or http://dx.doi.org/10.2139/ssrn.3782771

Christian T. Lundblad

University of North Carolina Kenan-Flagler Business School ( email )

Kenan-Flagler Business School
Chapel Hill, NC 27599-3490
United States
919-962-8441 (Phone)

Frank Hawkins Kenan Institute of Private Enterprise ( email )

Campus Box 3440, The Kenan Center
Chapel Hill, NC 27599-344
United States

Jitao Ou

Hong Kong Baptist University ( email )

Kowloon Tong
Hong Kong
Hong Kong

Zhongyan Zhu (Contact Author)

Monash University ( email )

Department of Banking and Finance
Caufield East, Victoria 3145
Australia
61-3-9903-4546 (Phone)

HOME PAGE: http://johnchungyenchu.org/

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