When a loan is close to becoming non-performing, banks have stronger incentives to renegotiate it in favourable conditions for the borrower (loan forbearance) rather than for recognising and resolving the non-performing loan. At the aggregated level and looking at borrowers (non-financial...

The conventional view is that capital requirements, those intended to reduce bank risks, can have a negative impact on bank lending. This paper reconsiders this view by studying the interaction between capital requirements and corporate governance. Our model highlights how capital requirements...

We introduce a model to illustrate how the effect of capital requirements on bank lending can qualitatively depend on the extent of managerial protections against shareholder actions. Protections encourage managers to pursue unprofitable projects. Protected managers can still be disciplined by...

We provide evidence that a weak banking sector has contributed to low productivity growth following the European sovereign debt crisis. An unexpected increase in capital requirements for a subset of Portuguese banks in 2011 provides a natural experiment to study the effects of reduced bank...

This paper explores the connection between "zombie" firms (firms that would typically exit in a competitive market) and bank health and the consequences for aggregate productivity in 11 European countries. Controlling for cyclical effects, the results show that zombie firms are more likely to be...

We show that bank lending standards are influenced by macroeconomic conditions. We use monthly data from the Banco de España Central Credit Register, which allow us to monitor all loan applications made by non-financial firms to non-current banks from 2002 to 2015. To test the pro-cyclicality...

We study the impact of bank credit supply on firm output and productivity. By exploiting a matched firm-bank database which covers all the credit relationships of Italian corporations over more than a decade, we measure idiosyncratic supply-side shocks to firms' credit availability. We use our...

We study the impact of bank credit supply on firm output and productivity. By exploiting a matched firm-bank database which covers all the credit relationships of Italian corporations over more than a decade, we measure idiosyncratic supply-side shocks to firms' credit availability. We use our...

This paper examines for the first time the impact of problem loans on Japanese productivity growth. We exploit a new data set of Japanese problem loans classified into two categories: bankrupt and restructured loans. We opt for a novel and flexible productivity growth decomposition that allows...

This paper uses a large firm-level data set of UK companies and information on their pre-crisis lending relationships to identify the causal links from changes in credit supply to the real economy following the 2008 financial crisis. Controlling for demand in the product market, we find that the...