Firm-specific shocks and contagion: are banks special?

Hannah Katharina Engljähringer and Livio Stracca

No 2481, Working Paper Series from European Central Bank

Abstract: This paper builds a database of idiosyncratic shocks (events) in global banks and car manufacturers (as representative of non-financial firms), and focuses on how these influence a number of macroeconomic and firm-specific variables in the short- and medium-term. We find that these shocks spawn large and persistent effects on the firms’ own market valuation in terms of their equity prices, CDS spreads and expected default probabilities, while contagion across firms in both sectors is generally small. Surprisingly, we find that spill-overs of bank-related events are not significantly different from the car sector, suggesting that, at least from this perspective, banks are not special. We also investigate whether our events are “granular”, i.e. influencing aggregate variables such as the VIX, equity indexes and key exchange rates, with mixed results. JEL Classification: F3, G2

Keywords: contagion; event study; global banks; local projections; systemic risk (search for similar items in EconPapers)
Date: 2020-10
Note: 335958
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Persistent link: https://EconPapers.repec.org/RePEc:ecb:ecbwps:20202481

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