Bank Loans During the 2008 Quantitative Easing

58 Pages Posted: 19 Mar 2021 Last revised: 1 May 2021

See all articles by Hsuan-Chi Chen

Hsuan-Chi Chen

University of New Mexico

Robin K. Chou

National Chengchi University (NCCU)

Chih-Yung Lin

National Yang Ming Chiao Tung University

Chien-Lin Lu

National Ilan University

Date Written: February 14, 2021

Abstract

We examine the effect of quantitative easing on the supply of bank loans. During the 2008 quantitative easing, lending banks reduce relatively more loan spreads, offer longer loan maturities, provide larger loans, and loosen covenants for firms whose long-term bond ratings are lower than BBB. Furthermore, we find that new bank loans in this period are associated with the reduction of a firm’s value and the increase of default risk. The results indicate that banks take greater risk during the 2008 quantitative easing by relaxing lending standards to relatively riskier borrowers.

Keywords: Bank loans; Default risk; Firm value; Quantitative easing.

JEL Classification: E58; G12; G21; G32

Suggested Citation

Chen, Hsuan-Chi and Chou, Robin K. and Lin, Chih-Yung and Lu, Chien-Lin, Bank Loans During the 2008 Quantitative Easing (February 14, 2021). Available at SSRN: https://ssrn.com/abstract=3785545 or http://dx.doi.org/10.2139/ssrn.3785545

Hsuan-Chi Chen

University of New Mexico ( email )

107 Humanitites Building
Albuquerque, NM 87131-1221
United States

Robin K. Chou

National Chengchi University (NCCU) ( email )

No. 64, Chih-Nan Road
Section 2
Wenshan, Taipei, 11623
Taiwan

Chih-Yung Lin

National Yang Ming Chiao Tung University ( email )

National chiao tung university, 1001 university ro
Hsinchu, 1001
Taiwan

Chien-Lin Lu (Contact Author)

National Ilan University ( email )

Yilan
Taiwan

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