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Which Banks Recover From Large Adverse Shocks?

Author

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  • Emilia Bonaccorsi di Patti
  • Anil Kashyap

Abstract

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.

Suggested Citation

  • Emilia Bonaccorsi di Patti & Anil Kashyap, 2017. "Which Banks Recover From Large Adverse Shocks?," NBER Working Papers 23654, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:23654
    Note: CF EFG ME
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    References listed on IDEAS

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    Cited by:

    1. Francesco Manaresi & Nicola Pierri, 2018. "Credit supply and productivity growth," Temi di discussione (Economic working papers) 1168, Bank of Italy, Economic Research and International Relations Area.
    2. Francesco Manaresi & Nicola Pierri, 2018. "Credit supply and productivity growth," BIS Working Papers 711, Bank for International Settlements.

    More about this item

    JEL classification:

    • 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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