Number of creditors and the real effects of credit supply disruptions

Sajad Ebrahimi, Ali Ebrahimnejad and Mahdi Rastad

Emerging Markets Review, 2023, vol. 55, issue C

Abstract: This paper examines the role of bank-firm relationships in transmitting credit supply shocks to the real side of the economy in an emerging market. Using a hand-collected dataset for Iranian public companies, we exploit firms' exposure to a bank involved in a massive Ponzi scheme in 2011. We document a nearly 8 percentage point drop in annual employment growth rate for firms connected to the troubled bank following the credit dry-up caused by the scandal. We show that the magnitude of the effect on employment and investment is amplified by bank-firm relationship at least as much as by the financial constraint status found in previous studies. The results highlight the role of bank-firm relationships and the importance of access to multiple creditors in alleviating the consequences of credit supply disruptions.

Keywords: Credit supply channel; Embezzlement; Bank fraud; Bank-firm relationship; Number of creditors; Employment (search for similar items in EconPapers)
JEL-codes: E24 E44 G20 (search for similar items in EconPapers)
Date: 2023
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S1566014123000110
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:ememar:v:55:y:2023:i:c:s1566014123000110

DOI: 10.1016/j.ememar.2023.101006

Access Statistics for this article

Emerging Markets Review is currently edited by Jonathan A. Batten

More articles in Emerging Markets Review from Elsevier
Bibliographic data for series maintained by Catherine Liu ().