In this paper we explore the process of convergence to firms’ target leverage ratios. Using a unique dataset of micro, small, medium and large firms, we find that this process is very fast, most notably for smaller firms. We further explore these results by analyzing different convergence...

This paper provides new evidence on the effect of bank competition on the cost of lending, in an environment of reduced information asymmetries between firms and banks. We construct a simple model linking the number of bank relationships, the cost of lending and bank competition. Banks are...

Understanding why some firms default, while others do not, is an important issue for the assessment of financial stability. In this domain, it may be interesting to understand if credit risk is driven mostly by idiosyncratic firm characteristics or by systematic factors, which simultaneously...

Estimating the impact of bank mergers on credit granted and on interest rates requires a framework that allows to disentangle the effect of changes in market structure generated by mergers from the effects arising from changes in banks’ operating environment. However, most of the literature on...

It is well established that when monetary policy is accommodative, banks tend to grant more credit. However, only recently attention was given to the quality of credit granted and, naturally, the risk assumed during those periods. This article makes an empirical contribution to the analysis of...

In this paper we investigate what happens to firms after they default on their bank loans. We approach this question by establishing a set of stylized facts concerning the evolution of default and its resolution, focusing on access to credit after default. Using a unique dataset from Portugal,...

Banks individually optimize their liquidity risk management, often neglecting the externalities generated by their choices on the overall risk of the financial system. This is the main argument to support the regulation of liquidity risk. However, there may be incentives, related for instance to...

Using micro-level data on the entire population of business loans of a bank-based economy, we empirically test some of the core predictions of the SME financing literature, examining banks’ lending specializations in firm size and lending technologies. Rejecting the conventional belief that...