Spare tire? Stock markets, banking crises, and economic recoveries

Ross Levine (), Chen Lin and Wensi Xie

Journal of Financial Economics, 2016, vol. 120, issue 1, 81-101

Abstract: Do stock markets act as a spare tire during banking crises, providing an alternative corporate financing channel and mitigating the economic severity of these crises? Using firm-level data in 36 countries from 1990 through 2011, we find that the adverse consequences of banking crises on equity issuances, firm profitability, employment, and investment efficiency are smaller in countries with stronger shareholder protection laws. These findings are not explained by the development of stock markets or financial institutions prior to the crises, the severity of the banking crisis, or overall economic, legal, and institutional development.

Keywords: Shareholder protection laws; Corporate finance; Financial crises; Firm profits; Firm investment choices (search for similar items in EconPapers)
JEL-codes: D21 G21 G32 K22 (search for similar items in EconPapers)
Date: 2016
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Citations: View citations in EconPapers (49)

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Working Paper: Spare Tire? Stock Markets, Banking Crises, and Economic Recoveries (2015)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jfinec:v:120:y:2016:i:1:p:81-101

DOI: 10.1016/j.jfineco.2015.05.009

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