Bank Risk and Firm Investment: Evidence from Firm-Level Data

Anastasiya Shamshur () and Laurent Weill
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Anastasiya Shamshur: King’s College London

Journal of Financial Services Research, 2023, vol. 63, issue 1, No 1, 34 pages

Abstract: Abstract Is higher bank risk-taking associated with more firm investment? Combining firm- and bank-level data, we examine the relation between bank risk and firm investment in a large sample of firms from nine European countries. We find that bank risk is positively associated with firm investment. Our finding accords with the modern theory of financial intermediation: risk taking by banks enhances firm investment as banks become more willing to perform their key function in the economy. Additionally, we also find that this positive relation is stronger for financially-constrained firms and when banks are more efficient.

Keywords: Bank risk; Firm investment (search for similar items in EconPapers)
JEL-codes: G21 L11 (search for similar items in EconPapers)
Date: 2023
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DOI: 10.1007/s10693-022-00379-y

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