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Which Banks Recover From Large Adverse Shocks?

Listed author(s):
  • Emilia Bonaccorsi di Patti
  • Anil Kashyap

We analyze the fate of 110 Italian banks that experienced abrupt drops in profitability, from which about 1/3 recover. Recovery depends primarily on post-shock adjustments made by the banks, particularly to their loan portfolios. Matched bank-borrower data shows that recovering banks are significantly more aggressive in managing their riskiest clients. The risk management differences are consistent with some banks cutting credit to very riskiest clients while others appear to be gambling for reclamation by continuing to extend credit to high risk borrowers.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 23654.

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Date of creation: Aug 2017
Handle: RePEc:nbr:nberwo:23654
Note: CF EFG ME
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