We test whether financial fluctuations affect firms' decisions, through their impact on banks' cost of funding. We exploit two shocks to Italian bank CDS spreads and equity valuations: the 2007-2009 financial crisis and the 2010-2012 sovereign debt crisis. Using newly available data linking over...

Deteriorating public finances around the world raise doubts about countries’ abilities to bail out their largest banks. For an international sample of banks, this paper investigates the impact of government indebtedness and deficits on bank stock prices and CDS spreads. Overall, bank stock...

How do banks react to increased interbank competition?Recent banking theory offers conflicting predictions about the impact of competition on bank orientation í L H WKH choice of relationship based versus transactional banking í DQG EDQN LQGXVWU\ specialization.We empirically investigate the...

Abstract: This paper documents large cross-country variation in the relationship between bank competition and bank stability and explores market, regulatory and institutional features that can explain this variation. We show that an increase in competition will have a larger impact on banks’...

This paper examines how the correlation structure of loan returns within a bank s loan portfolio a.ects its choice of .nancing when the bank faces binding capital constraints and there is asymmetric information about the quality of its loans.The paper uses an asymmetric information model similar...

We employ a unique data set containing bank-specific information to explore how foreign bank entry determines credit allocation in emerging markets. We investigate the impact of the mode of foreign entry (greenfield or takeover) on banks’ portfolio allocation to borrowers with different...

On May 9, 2010 euro zone countries announced the creation of the European Financial Stability Facility as a response to the sovereign debt crisis. This paper investigates the impact of this announcement on bank share prices, bank CDS spreads and sovereign CDS spreads. The main private...

In this paper we use credit rating data from two Swedish banks to elicit evidence on these banks’ loan monitoring ability. We do so by comparing the ability of bank ratings to predict loan defaults relative to that of public ratings from the Swedish credit bureau. We test the banks’...

We examine how relational contracting in credit and investment relationships is affected by the potential expropriation of funds. We implement credit relationships in which repayment is not third-party enforceable, i.e. borrowers can default on their loans. In our main treatment the borrower can...