The Impact of Bank Shocks on Firm-level Outcomes and Bank Risk-taking

We examine the impact of bank-loan supply shocks on firm outcomes and bank risk-taking employing bank-firm matched credit information for the period 2002-2012.

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Hans Degryse (KU Leuven)

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Hans Degryse is Professor of Finance at the Department of Accountancy, Finance and Insurance of the KU Leuven. He is a research fellow at the CEPR, CESIfo, the European Banking Center (EBC), and TILEC, and is member of the academic council of EBC. Before joining Leuven in 2012, he was professor of finance at Tilburg University. His research focuses on financial intermediation, including theoretical and empirical banking as well as market microstructure.

Programm

We examine the impact of bank-loan supply shocks on firm outcomes and bank risk-taking employing bank-firm matched credit information for the period 2002-2012. Towards this end, we develop and estimate cross-sectional measures of bank-loan supply shocks. We find that firms borrowing from banks with negative supply shocks exhibit slower growth and investment, and a delayed negative response of employment. Banks faced with positive supply shocks show risk-taking behaviour at the extensive margin. Our estimated bank-loan shocks correlate positively with interbank liabilities growth and an alternative indicator of bank-loan supply, i.e. bank-lending standards.