Corporate Resilience to Banking Crises: The Roles of Trust and Trade Credit

Ross Levine (), Chen Lin and Wensi Xie

Journal of Financial and Quantitative Analysis, 2018, vol. 53, issue 4, 1441-1477

Abstract: Are firms more resilient to systemic banking crises in economies with higher levels of social trust? Using firm-level data in 34 countries from 1990 through 2011, we find that liquidity-dependent firms in high-trust countries obtain more trade credit and suffer smaller drops in profits and employment during banking crises than similar firms in low-trust economies. The results are consistent with the view that when banking crises block the normal bank-lending channel, greater social trust facilitates access to informal finance, cushioning the effects of these crises on corporate profits and employment.

Date: 2018
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Working Paper: Corporate Resilience to Banking Crises: The Roles of Trust and Trade Credit (2016)
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Persistent link: https://EconPapers.repec.org/RePEc:cup:jfinqa:v:53:y:2018:i:04:p:1441-1477_00

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