Bank shocks and firm performance: new evidence from the sovereign debt crisis

Farinha, L., Spaliara, M.-E. and Tsoukas, S. (2019) Bank shocks and firm performance: new evidence from the sovereign debt crisis. Journal of Financial Intermediation, 40, 100818. (doi: 10.1016/j.jfi.2019.01.005)

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Prior empirical investigations of corporate failures consider the effects of macroeconomic conditions and financial health, but the literature contains limited evidence of the real effects of the bank shocks caused by the sovereign debt crisis. Using a rich source of high-quality firm-bank matched data for 2005-2014, this study examines the real effects of bank shocks on firms' survival prospects in Portugal. We first present evidence that a funding outflow is associated with a reduction in the credit supply. Furthermore, firms borrowing from banks exposed to the funding outflow are more likely to fail. We also uncover significant heterogeneity in firms' financial positions and show that the negative effect of a funding shock is stronger for younger, higher-risk firms, and those that used their potential lines of bank credit.

Item Type:Articles
Glasgow Author(s) Enlighten ID:Spaliara, Professor Marina Eliza and Tsoukas, Professor Serafeim
Authors: Farinha, L., Spaliara, M.-E., and Tsoukas, S.
Subjects:H Social Sciences > HG Finance
College/School:College of Social Sciences > Adam Smith Business School > Accounting and Finance
College of Social Sciences > Adam Smith Business School > Economics
Journal Name:Journal of Financial Intermediation
ISSN (Online):1096-0473
Published Online:17 April 2019
Copyright Holders:Copyright © 2019 Elsevier Inc.
First Published:First published in Journal of Financial Intermediation 40:100818
Publisher Policy:Reproduced in accordance with the publisher copyright policy

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