The U.S. bank stress tests aim to improve financial system stability. However, they may also affect bank credit supply. We formulate and test opposing hypotheses about these effects. Our findings are consistent with the Risk Management Hypothesis, under which stress-tested banks reduce credit...

Over the past two decades, banks have increasingly focused on offering contingent credit in the form of credit lines as a primary means of corporate borrowing. We review the existing body of research regarding the rationales for banks' provision of liquidity insurance in the form of credit...

In August of 2007, banks faced a freeze in funding liquidity from the asset-backed commercial paper (ABCP) market. We investigate how banks scrambled for liquidity in response to this freeze and its implications for corporate borrowing. Commercial banks in the United States raised deposits and...

Using a comprehensive dataset from German banks, we document the usage of sovereign credit default swaps (CDS) during the European sovereign debt crisis of 2008-2013. Banks used the sovereign CDS market to extend, rather than hedge, their long exposures to sovereign risk during this period....

Using a comprehensive dataset from German banks, we document the usage of sovereign credit default swaps (CDS) during the European sovereign debt crisis of 2008-2013. Banks used the sovereign CDS market to extend, rather than hedge, their long exposures to sovereign risk during this period....

Using a comprehensive dataset from German banks, we document the usage of sovereign credit default swaps (CDS) during the European sovereign debt crisis of 2008-2013. Banks used the sovereign CDS market to extend, rather than hedge, their long exposures to sovereign risk during this period....

We explore the impact of the credit crunch that followed the European debt crisis on the corporate policies of European firms. We show that banks' exposures to impaired sovereign debt and the risk-shifting behavior of undercapitalized banks contributed significantly to the severity of the...

Using real estate investment trusts (REITs) that invest in commercial real estate (CRE) as a leading example, we study the implications for banks of extending credit lines to "shadow banks" or non-bank financial intermediaries (NBFIs). While small and mid-size banks hold an economically...

Greater reliance on nonbank financing makes firms fragile as it leads banks to limit their access to credit lines. Besides demonstrating this result in panel tests subject to range of controls and robustness checks, we employ the 2014-16 oil-price collapse as an exogenous rollover risk in...