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Shocks Abroad, Pain at Home? Bank-Firm Level Evidence on the International Transmission of Financial Shocks

Steven Ongena (), Jose-Luis Peydro () and Neeltje Van Horen ()

DNB Working Papers from Netherlands Central Bank, Research Department

Abstract: We study the international transmission of shocks from the banking to the real sector during the global financial crisis. For identification, we use matched bank-firm level data, including many small and medium-sized firms, in Eastern Europe and Central Asia. We find that internationally-borrowing domestic and foreign-owned banks contract their credit more during the crisis than domestic banks that are funded only locally. Firms that are dependent on credit and at the same time have a relationship with an internationally-borrowing domestic or a foreign bank (as compared to a locally-funded domestic bank) suffer more in their financing and real performance. Single-bank-relationship firms, small firms and firms with intangible assets suffer most. For credit-independent firms, there are no differential effects. Our findings suggest that financial globalization has intensified the international transmission of financial shocks with substantial real consequences

Keywords: international transmission; firm real effects; foreign banks; international wholesale funding; credit shock (search for similar items in EconPapers)
JEL-codes: G01 G21 F23 F36 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-ban, nep-ifn, nep-opm and nep-tra
Date: 2013-07
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Persistent link: https://EconPapers.repec.org/RePEc:dnb:dnbwpp:385

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