Bank Systemic Risk and Corporate Investment : Cross-Country Evidence

We analyze whether variation in systemic risk in the banking system (also known as “bank systemic risk”) can explain corporate investment. We show that in a sample of publicly listed firms in 10 advanced and emerging markets economies during the period 1990–2013, bank systemic risk is positively associated with the corporate investment, after controlling for a large set of country- and firm-level variables. We find that the positive effect is evident until the onset of the global financial crisis of 2007 and that the effect becomes negative after 2007. We show that the influence of bank systemic risk on corporate investment varies, depending on firm size and growth opportunities