IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Login to save this paper or follow this series

Credit supply, flight to quality and evergreening: an analysis of bank-firm relationships after Lehman

  • Ugo Albertazzi

    ()

    (Bank of Italy)

  • Domenico J. Marchetti

    ()

    (Bank of Italy)

This paper analyzes the effects of the financial crisis on credit supply by using highly detailed data on bank-firm relationships in Italy after Lehman’s collapse. We control for firms’ unobservable characteristics, such as credit demand and borrowers’ risk, by exploiting multiple lending. We find evidence of a contraction of credit supply, associated to low bank capitalization and scarce liquidity. The ability of borrowers to compensate through substitution across banks appears to have been limited. We also document that larger less-capitalized banks reallocated loans away from riskier firms, contributing to credit pro-cyclicality. Such ‘flight to quality’ has not occurred for smaller less-capitalized banks. We argue that this may have reflected, among other things, evergreening practices. We provide corroborating evidence based on data on borrowers' productivity and interest rates at bank-firm level.

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://www.bancaditalia.it/pubblicazioni/temi-discussione/2010/2010-0756/en_tema_756.pdf
Download Restriction: no

Paper provided by Bank of Italy, Economic Research and International Relations Area in its series Temi di discussione (Economic working papers) with number 756.

as
in new window

Length:
Date of creation: Apr 2010
Date of revision:
Handle: RePEc:bdi:wptemi:td_756_10
Contact details of provider: Postal: Via Nazionale, 91 - 00184 Roma
Web page: http://www.bancaditalia.it

More information through EDIRC

No references listed on IDEAS
You can help add them by filling out this form.

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:bdi:wptemi:td_756_10. 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 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 references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link 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 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.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.