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Bank Risk and Firm Investment: Evidence from Firm-Level Data

Author

Listed:
  • Anastasiya Shamshur

    (King’s College London
    CERGE-EI, Charles University and the Academy of Sciences)

  • Laurent Weill

    (Université de Strasbourg
    Moscow State Institute of International Relations (MGIMO University))

Abstract

Is higher bank risk-taking associated with more firm investment? Combining firm- and bank-level data, we examine the relation between bank risk and firm investment in a large sample of firms from nine European countries. We find that bank risk is positively associated with firm investment. Our finding accords with the modern theory of financial intermediation: risk taking by banks enhances firm investment as banks become more willing to perform their key function in the economy. Additionally, we also find that this positive relation is stronger for financially-constrained firms and when banks are more efficient.

Suggested Citation

  • Anastasiya Shamshur & Laurent Weill, 2023. "Bank Risk and Firm Investment: Evidence from Firm-Level Data," Journal of Financial Services Research, Springer;Western Finance Association, vol. 63(1), pages 1-34, February.
    • Handle: RePEc:kap:jfsres:v:63:y:2023:i:1:d:10.1007_s10693-022-00379-y
    DOI: 10.1007/s10693-022-00379-y
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    More about this item

    Keywords

    Bank risk; Firm investment;

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms

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