IDEAS home Printed from https://ideas.repec.org/a/oup/rfinst/v31y2018i8p2855-2896..html
   My bibliography  Save this article

Real Effects of the Sovereign Debt Crisis in Europe: Evidence from Syndicated Loans

Author

Listed:
  • Viral V Acharya
  • Tim Eisert
  • Christian Eufinger
  • Christian Hirsch

Abstract

We explore the causes of the credit crunch during the European sovereign debt crisis and its impact on the corporate policies of European firms. Our results show that value impairment in banks’ exposures to sovereign debt and the risk-shifting behavior of weakly capitalized banks reduced the probability of firms being granted new syndicated loans by up to 53%. This lending contraction depressed investment, employment, and sales growth of firms affiliated with affected banks. Our estimates based on firm-level data suggest that the credit crunch explains between 44% and 66% of the overall negative real effects suffered by European firms. Received April 5, 2016; editorial decision February 3, 2018 by Editor Andrew Karolyi. Authors have furnished an Internet Appendix, which is available on the Oxford University Press Web site next to the link to the final published paper online.

Suggested Citation

  • Viral V Acharya & Tim Eisert & Christian Eufinger & Christian Hirsch, 2018. "Real Effects of the Sovereign Debt Crisis in Europe: Evidence from Syndicated Loans," Review of Financial Studies, Society for Financial Studies, vol. 31(8), pages 2855-2896.
  • Handle: RePEc:oup:rfinst:v:31:y:2018:i:8:p:2855-2896.
    as

    Download full text from publisher

    File URL: http://hdl.handle.net/10.1093/rfs/hhy045
    Download Restriction: Access to full text is restricted to subscribers.

    As the access to this document is restricted, you may want to look for a different version below or search for a different version of it.

    Other versions of this item:

    References listed on IDEAS

    as
    1. Ralph De Haas & Neeltje Van Horen, 2013. "Running for the Exit? International Bank Lending During a Financial Crisis," Review of Financial Studies, Society for Financial Studies, vol. 26(1), pages 244-285.
    2. Balduzzi, Pierluigi & Brancati, Emanuele & Schiantarelli, Fabio, 2018. "Financial markets, banks’ cost of funding, and firms’ decisions: Lessons from two crises," Journal of Financial Intermediation, Elsevier, vol. 36(C), pages 1-15.
    3. Vitaly M. Bord & João A.C. Santos, 2014. "Banks' Liquidity and the Cost of Liquidity to Corporations," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 46(s1), pages 13-45, February.
    4. Giannetti, Mariassunta & Laeven, Luc, 2012. "The flight home effect: Evidence from the syndicated loan market during financial crises," Journal of Financial Economics, Elsevier, vol. 104(1), pages 23-43.
    5. Arteta, Carlos & Hale, Galina, 2008. "Sovereign debt crises and credit to the private sector," Journal of International Economics, Elsevier, vol. 74(1), pages 53-69, January.
    6. Marcello Bofondi & Luisa Carpinelli & Enrico Sette, 2018. "Credit Supply During a Sovereign Debt Crisis," Journal of the European Economic Association, European Economic Association, vol. 16(3), pages 696-729.
    7. Guido W. Imbens & Jeffrey M. Wooldridge, 2009. "Recent Developments in the Econometrics of Program Evaluation," Journal of Economic Literature, American Economic Association, vol. 47(1), pages 5-86, March.
    8. Ricardo Correa & Horacio Sapriza & Andrei Zlate, 2012. "Liquidity shocks, dollar funding costs, and the bank lending channel during the European sovereign crisis," International Finance Discussion Papers 1059, Board of Governors of the Federal Reserve System (U.S.), revised 2012.
    9. Acharya, Viral V. & Steffen, Sascha, 2015. "The “greatest” carry trade ever? Understanding eurozone bank risks," Journal of Financial Economics, Elsevier, vol. 115(2), pages 215-236.
    10. Samuel Bentolila & Marcel Jansen & Gabriel Jiménez, 2018. "When Credit Dries Up: Job Losses in the Great Recession," Journal of the European Economic Association, European Economic Association, vol. 16(3), pages 650-695.
    11. Becker, Bo & Ivashina, Victoria, 2014. "Cyclicality of credit supply: Firm level evidence," Journal of Monetary Economics, Elsevier, vol. 62(C), pages 76-93.
    12. Alexander Popov & Neeltje van Horen, 2013. "The impact of sovereign debt exposure on bank lending: Evidence from the European debt crisis," DNB Working Papers 382, Netherlands Central Bank, Research Department.
    13. Acharya, Viral & Almeida, Heitor & Ippolito, Filippo & Perez, Ander, 2014. "Credit lines as monitored liquidity insurance: Theory and evidence," Journal of Financial Economics, Elsevier, vol. 112(3), pages 287-319.
    14. Gabriel Chodorow-Reich, 2014. "The Employment Effects of Credit Market Disruptions: Firm-level Evidence from the 2008-9 Financial Crisis," The Quarterly Journal of Economics, Oxford University Press, vol. 129(1), pages 1-59.
    15. Bank for International Settlements, 2011. "The impact of sovereign credit risk on bank funding conditions," CGFS Papers, Bank for International Settlements, number 43, September.
    16. Victoria Ivashina & David Scharfstein & Jeremy C. Stein, 2012. "Dollar funding and the lending behavior of global banks," Finance and Economics Discussion Series 2012-74, Board of Governors of the Federal Reserve System (U.S.).
    17. Bernanke, Ben S, 1983. "Nonmonetary Effects of the Financial Crisis in Propagation of the Great Depression," American Economic Review, American Economic Association, vol. 73(3), pages 257-276, June.
    18. Federico Cingano & Francesco Manaresi & Enrico Sette, 2016. "Does Credit Crunch Investment Down? New Evidence on the Real Effects of the Bank-Lending Channel," Review of Financial Studies, Society for Financial Studies, vol. 29(10), pages 2737-2773.
    19. Ugo Albertazzi & Domenico J. Marchetti, 2010. "Credit supply, flight to quality and evergreening: an analysis of bank-firm relationships after Lehman," Temi di discussione (Economic working papers) 756, Bank of Italy, Economic Research and International Relations Area.
    20. Ivashina, Victoria, 2009. "Asymmetric information effects on loan spreads," Journal of Financial Economics, Elsevier, vol. 92(2), pages 300-319, May.
    21. Philip R. Lane, 2012. "The European Sovereign Debt Crisis," Journal of Economic Perspectives, American Economic Association, vol. 26(3), pages 49-68, Summer.
    22. Amir Sufi, 2007. "Information Asymmetry and Financing Arrangements: Evidence from Syndicated Loans," Journal of Finance, American Finance Association, vol. 62(2), pages 629-668, April.
    23. Ivashina, Victoria & Scharfstein, David, 2010. "Bank lending during the financial crisis of 2008," Journal of Financial Economics, Elsevier, vol. 97(3), pages 319-338, September.
    24. Heitor Almeida & Murillo Campello & Michael S. Weisbach, 2004. "The Cash Flow Sensitivity of Cash," Journal of Finance, American Finance Association, vol. 59(4), pages 1777-1804, August.
    Full references (including those not matched with items on IDEAS)

    More about this item

    JEL classification:

    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:oup:rfinst:v:31:y:2018:i:8:p:2855-2896.. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Oxford University Press). General contact details of provider: http://edirc.repec.org/data/sfsssea.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.