Granular banks and corporate investment

Adriano Maia, Guilherme De Oliveira, Raul Matsushita and Sergio Da Silva
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Adriano Maia: Federal University of Santa Catarina
Guilherme De Oliveira: Federal University of Santa Catarina
Raul Matsushita: University of Brasilia

Journal of Economics and Finance, 2023, vol. 47, issue 3, No 3, 586-599

Abstract: Abstract We examine the explanatory power of the granular residual of the five main Brazilian banks from 2010 to 2019 on corporate investment. Approximately two-thirds of the total investment rate is attributable to idiosyncratic shocks to the overall operating revenues of these banks, according to our results. Because the Brazilian banking industry is more concentrated, this proportion is higher than that discovered in a study for Japan. In addition, the explanatory power rises when typical monetary and fiscal macroeconomic shocks are added, and the number of microeconomic shocks associated with the banking granular residual exceeds the number of fiscal shocks and monetary shocks. A policy implication is that strategic monetary policy coordination must monitor the five giants’ microeconomic environments because shocks from them may amplify or even nullify monetary policy measures.

Keywords: Granularity; Granular residual; Banks; Corporate investment; Aggregate investment. (search for similar items in EconPapers)
JEL-codes: C46 E32 E44 G21 G32 (search for similar items in EconPapers)
Date: 2023
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DOI: 10.1007/s12197-023-09641-y

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