 Decoupling the distressed banks and their clients, and coupling the distressed firms and their lending banksChien-An Wang and Chung-Hua Shen Pacific-Basin Finance Journal, 2012, vol. 20, issue 3, 483-505 Abstract: This paper simultaneously investigates the responses of stock prices of the related banks and the client firms when one of them is in distress. Two effects are examined. The distressed bank effect, which claims that the stock price of client firms are coupled to that of their related distress banks, and the distressed firm effect, which claims that the related banks are negatively affected when their client firms are in distress. We collect the detailed information of individual transaction loan data to find the relationship between banks and their client firms. Asymmetric responses are reported in this paper. Our results reject the distressed bank effect but, by contrast, cannot reject the distressed firm effect. We propose the fund diversification hypothesis and the leverage hypothesis, and argue the decoupling effect of the distressed bank and their listed firms, owing to the diversified choice of clients' financing channel. Keywords: (De)coupling; Distressed bank effect; Distressed firm effect; Fund diversification hypothesis; Leverage hypothesis (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:pacfin:v:20:y:2012:i:3:p:483-505 DOI: 10.1016/j.pacfin.2011.12.003 Access Statistics for this article Pacific-Basin Finance Journal is currently edited by K. Chan and S. Ghon Rhee More articles in Pacific-Basin Finance Journal from Elsevier |
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