The Home Bias and the Credit Crunch: A Regional Perspective

Andrea Presbitero, Gregory Udell () and Alberto Zazzaro ()

No 60, Mo.Fi.R. Working Papers from Money and Finance Research group (Mo.Fi.R.) - Univ. Politecnica Marche - Dept. Economic and Social Sciences

Abstract: A major policy issue is whether troubles in the banking system re ected in the bankruptcy of Lehman Brothers in September 2008 have spurred a credit crunch and, if so, how and why its severity has been different across markets and firms. In this paper, we tackle this issue by looking at the Italian case. We take advantage of a dataset on a large sample of manufacturing firms, observed quarterly between January 2008 and September 2009. Thanks to detailed information about loan applications and lending decisions, we are able to identify the occurrence of a credit crunch in Italy which has been found to be harsher in provinces with a large share of branches owned by distantly-managed banks. Inconsistent with the flight to quality hypothesis, however, we do not find evidence that economically weaker and smaller firms suffered more during the crisis period than during tranquil periods. By contrast, we find that large and healthy firms, the segment of borrowers which, according to theoretical predictions, are cream-skimmed by distantly-headquartered banks, were more intensely hit by the credit tightening in functionally distant credit markets than in the ones populated by less distant banks. This last result is consistent with the hypothesis of a home bias on the part of nationwide banks.

Keywords: Banking; Credit crunch; Distance; Flight to quality; Home bias (search for similar items in EconPapers)
JEL-codes: F33 F34 F35 O11 (search for similar items in EconPapers)
Pages: 33
Date: 2012-03
New Economics Papers: this item is included in nep-ban and nep-geo
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (20)

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Related works:
Journal Article: The Home Bias and the Credit Crunch: A Regional Perspective (2014)
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Persistent link: https://EconPapers.repec.org/RePEc:anc:wmofir:60

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