EconPapers    
Economics at your fingertips  
 

From financial to real economic crisis. Evidence from individual firm-bank relationships in Germany

Nadja Dwenger, Frank Fossen and Martin Simmler

VfS Annual Conference 2015 (Muenster): Economic Development - Theory and Policy from Verein für Socialpolitik / German Economic Association

Abstract: What began as a financial crisis in the U.S. in 2007/8 quickly became a massive crisis of the global real economy. We investigate the importance of the bank lending and firm borrowing channel in the international transmission of bank distress to the real economy, in particular to firm investment. We exploit a unique data set for Germany which contains financial statements at the level of the firm for the period 2004 2010 together with the financial statements of each firm s relationship bank(s). The data include small and medium sized firms. Using instrumental variable estimations in first differences to eliminate firm- and bank-specific effects, we find that banks which were affected at the onset of the financial crisis due to proprietary trading activities cut back lending more strongly relative to non-affected banks. Firms whose relationship banks reduce lending downsize real investment significantly. The effect tends to be larger for smaller and younger firms as well as for firms unable to provide much collateral. We also document that some of the firms partially offset reduced credit supply by using up internal funds, by issuing new equity, and by establishing new bank relationships.

JEL-codes: D22 D92 G01 (search for similar items in EconPapers)
Date: 2015
New Economics Papers: this item is included in nep-ban
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (7)

Downloads: (external link)
https://www.econstor.eu/bitstream/10419/113000/1/VfS_2015_pid_162.pdf (application/pdf)

Related works:
Working Paper: From Financial to Real Economic Crisis: Evidence from Individual Firm-Bank Relationships in Germany (2015) Downloads
Working Paper: From financial to real economic crisis: Evidence from individual firm-bank relationships in Germany (2015) Downloads
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:zbw:vfsc15:113000

Access Statistics for this paper

More papers in VfS Annual Conference 2015 (Muenster): Economic Development - Theory and Policy from Verein für Socialpolitik / German Economic Association Contact information at EDIRC.
Bibliographic data for series maintained by ZBW - Leibniz Information Centre for Economics ().

 
Page updated 2025-03-22
Handle: RePEc:zbw:vfsc15:113000