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

Author

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

Abstract

This paper shows that the sovereign debt crisis and the resulting credit crunch in the periphery of the Eurozone lead to negative real effects for borrowing firms. Using a hand matched sample of loan information from Dealscan and accounting information from Amadeus, we show that firms with a higher exposure to banks affected by the sovereign debt crisis become financially constrained during the crisis. As a result, these firms have significantly lower employment growth, capital expenditures, and sales growth rates. We show that our results are not driven by country or industry-specific macroeconomic shocks or a change in the demand for credit of borrowing firms. Thus, the high interdependence of bank and sovereign health and the resulting credit crunch is one important contributor to the severe economic downturn in the southern European countries during the sovereign debt crisis.

Suggested Citation

  • Acharya, Viral V & Eisert, Tim & Eufinger, Christian & Hirsch, Christian, 2014. "Real Effects of the Sovereign Debt Crisis in Europe: Evidence from Syndicated Loans," CEPR Discussion Papers 10108, C.E.P.R. Discussion Papers.
  • Handle: RePEc:cpr:ceprdp:10108
    as

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    References listed on IDEAS

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    More about this item

    Keywords

    credit contraction; European sovereign debt crisis; financing constraints; real effects;

    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

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