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Tracing the Impact of Bank Shocks under Bank-Specific Credit Demand

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Listed:
  • Bruche, Max
  • Farinha, Luísa
  • Kokas, Sotirios
  • Sette, Enrico
  • Tsoukas, Serafeim

Abstract

We propose a method for estimating the effect of bank shocks on credit supply when firms have heterogeneous preferences over banks. We model firms’ bank choices in a discrete-choice setting and show that firms prefer banks that are geographically closer, specialized in their industry, and better capitalized. The model yields a predicted probability that a firm borrows from a given bank, capturing firm-specific preferences that can be controlled for in standard credit supply regressions `a la Khwaja and Mian (2008). Accounting for these preferences changes the estimated transmission of shocks through banks, revealing a potential bias in the conventional identification strategy.

Suggested Citation

  • Bruche, Max & Farinha, Luísa & Kokas, Sotirios & Sette, Enrico & Tsoukas, Serafeim, 2026. "Tracing the Impact of Bank Shocks under Bank-Specific Credit Demand," CEPR Discussion Papers 21335, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:21335
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    Keywords

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    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G30 - Financial Economics - - Corporate Finance and Governance - - - General
    • E22 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Investment; Capital; Intangible Capital; Capacity
    • E51 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Money Supply; Credit; Money Multipliers

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