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Sovereign to corporate risk spillovers

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  • Augustin, Patrick
  • Boustanifar, Hamid
  • Breckenfelder, Johannes
  • Schnitzler, Jan

Abstract

The first Greek bailout on April 11, 2010 triggered a significant reevaluation of sovereign credit risk across Europe. We exploit this event to examine the transmission of sovereign to corporate credit risk. A ten percent increase in sovereign credit risk raises corporate credit risk on average by 1.1 percent after the bailout. The evidence is suggestive of risk spillovers from sovereign to corporate credit risk through a financial and a fiscal channel, as the effects are more pronounced for firms that are bank or government dependent. We find no support for indirect risk transmission through a deterioration of macroeconomic fundamentals. JEL Classification: F34, F36, G15, H81, G12

Suggested Citation

  • Augustin, Patrick & Boustanifar, Hamid & Breckenfelder, Johannes & Schnitzler, Jan, 2016. "Sovereign to corporate risk spillovers," Working Paper Series 1878, European Central Bank.
  • Handle: RePEc:ecb:ecbwps:20161878
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    References listed on IDEAS

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    Cited by:

    1. Gross, Christian & Siklos, Pierre, 2018. "Analyzing credit risk transmission to the non-financial sector in Europe: a network approach," ESRB Working Paper Series 78, European Systemic Risk Board.

    More about this item

    Keywords

    bailout; contagion; credit risk; Greece; risk transmission;

    JEL classification:

    • F34 - International Economics - - International Finance - - - International Lending and Debt Problems
    • F36 - International Economics - - International Finance - - - Financial Aspects of Economic Integration
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • H81 - Public Economics - - Miscellaneous Issues - - - Governmental Loans; Loan Guarantees; Credits; Grants; Bailouts
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates

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