How financial shocks transmit to the real economy? Banking business models and firm size

The paper analyzes the credit supply of commercial banks and universal banks over the 2003–2009 period. Relying on a unique database of credits, banks and firms covering more than 8000 firms from SMEs to large firms, I show that universal banks and commercial banks had a similar credit supply prior to the crisis. However, during the 2008 financial crisis, universal banks had a strongly lower credit supply, leading to real effects on firms’ investment. An analysis of transmission channels highlights a specific binding constraint applying to universal banks: their liquidity risk through off-balance-sheet commitments. While smallest firms are usually considered more vulnerable, the paper shows that small firms were less impacted by credit rationing than medium and large firms due to their bank-firm relationships prior to the crisis.