The Informational Centrality of Banks

Nathan Foley-Fisher, Gary Gorton and Stephane Verani

No 32007, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: The equity and debt prices of large nonbank firms contain information about the future state of the banking system. In this sense, banks are informationally central. The amount of this information varies over time and over equity and debt. During a financial crisis banks are, by definition of a crisis, at risk of failure. Debt prices became about 50 percent more informative than equity prices about the future state of the banking system during the financial crisis of 2007-2009. This was partly due to investors’ fears that banks might not be able to refinance their debt.

JEL-codes: G0 G2 G21 (search for similar items in EconPapers)
Date: 2023-12
New Economics Papers: this item is included in nep-ban and nep-fdg
Note: AP ME
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Working Paper: The Informational Centrality of Banks (2024)
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