Some borrowers are more equal than others: Bank funding shocks and credit reallocation
Olivier De Jonghe (),
Steven Ongena () and
No 361, Working Paper Research from National Bank of Belgium
This paper provides evidence on the strategic lending decisions made by banks facing a negative funding shock. Using bank-firm level credit data, we show that banks reallocate credit within their loan portfolio in at least three different ways. First, banks reallocate to sectors where they have a high market share. Second, they also reallocate to sectors in which they are more specialized. Third, they reallocate credit towards low-risk _rms. These reallocation effects are economically large. A standard deviation increase in sector market share, sector specialization or firm soundness reduces the transmission of the funding shock to credit supply by 22, 8 and 10 %, respectively.
Keywords: Credit reallocation; bank funding shock; bank credit; sector market share; sector specialization; firm risk (search for similar items in EconPapers)
JEL-codes: G01 G21 (search for similar items in EconPapers)
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Working Paper: Some borrowers are more equal than others: bank funding shocks and credit reallocation (2019)
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Persistent link: https://EconPapers.repec.org/RePEc:nbb:reswpp:201810-361
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