Bank Loans for Private and Public Firms in a Credit Crunch
Banks reliance on short-term funding has increased over time. While an effective source of financing in good times, the 2007 financial crisis has exposed the vulnerability of banks and ultimately firms to such a liability structure. The authors show that banks that relied most on wholesale funding were the ones to contract its lending the most during the crisis. Their results suggest that banks propagate liquidity shocks by reducing credit only to a certain type of borrower. Importantly, in the financial crisis banks passed the liquidity shock only to public firms. Furthermore, long-term relationships between firms and banks played an important role during the crisis. Public firms with weak banking relationships pre-crisis experienced a greater credit crunch than other public borrowers.
|Date of creation:||2011|
|Date of revision:|
|Contact details of provider:|| Postal: 234 Wellington Street, Ottawa, Ontario, K1A 0G9, Canada|
Phone: 613 782-8845
Fax: 613 782-8874
Web page: http://www.bank-banque-canada.ca/
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Bengt Holmstrom & Jean Tirole, 1994.
"Financial Intermediation, Loanable Funds and the Real Sector,"
95-1, Massachusetts Institute of Technology (MIT), Department of Economics.
- Bengt Holmstrom & Jean Tirole, 1997. "Financial Intermediation, Loanable Funds, and The Real Sector," The Quarterly Journal of Economics, Oxford University Press, vol. 112(3), pages 663-691.
- Holmström, Bengt & Tirole, Jean, 1994. "Financial Intermediation, Loanable Funds and the Real Sector," IDEI Working Papers 40, Institut d'Économie Industrielle (IDEI), Toulouse.
- Ben S. Bernanke & Mark Gertler, 1995.
"Inside the Black Box: The Credit Channel of Monetary Policy Transmission,"
Journal of Economic Perspectives,
American Economic Association, vol. 9(4), pages 27-48, Fall.
- Ben S. Bernanke & Mark Gertler, 1995. "Inside the Black Box: The Credit Channel of Monetary Policy Transmission," NBER Working Papers 5146, National Bureau of Economic Research, Inc.
- Bernanke, Ben & Gertler, Mark, 1995. "Inside the Black Box: The Credit Channel of Monetary Policy Transmission," Working Papers 95-15, C.V. Starr Center for Applied Economics, New York University.
- Ashcraft, Adam B., 2006.
"New Evidence on the Lending Channel,"
Journal of Money, Credit and Banking,
Blackwell Publishing, vol. 38(3), pages 751-775, April.
- Rocco Huang & Lev Ratnovski, 2009. "Why Are Canadian Banks More Resilient?," IMF Working Papers 09/152, International Monetary Fund.
- Stiglitz, Joseph E & Weiss, Andrew, 1981. "Credit Rationing in Markets with Imperfect Information," American Economic Review, American Economic Association, vol. 71(3), pages 393-410, June.
- Galina Hale & João A. C. Santos, 2010. "Do banks propagate debt market shocks?," Working Paper Series 2010-08, Federal Reserve Bank of San Francisco.
- Giorgio Gobbi & Enrico Sette, 2012.
"Relationship lending in a financial turmoil,"
Mo.Fi.R. Working Papers
59, Money and Finance Research group (Mo.Fi.R.) - Univ. Politecnica Marche - Dept. Economic and Social Sciences.
- Mark T. Leary, 2009. "Bank Loan Supply, Lender Choice, and Corporate Capital Structure," Journal of Finance, American Finance Association, vol. 64(3), pages 1143-1185, 06.
- Sudheer Chava & Michael R. Roberts, 2008. "How Does Financing Impact Investment? The Role of Debt Covenants," Journal of Finance, American Finance Association, vol. 63(5), pages 2085-2121, October.
When requesting a correction, please mention this item's handle: RePEc:bca:bocawp:11-13. 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: ()
If references are entirely missing, you can add them using this form.