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Distressed Relationships : Lessons from the Norwegian Banking Crisis

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  • Ongena, S.

    (Tilburg University, Center For Economic Research)

  • Smith, D.C.
  • Michalsen, D.

Abstract

This paper measures the economy-wide impact of bank distress on the loss of relationship benefits. We use the near-collapse of the Norwegian banking system during the period 1988 to 1991 to measure the impact of bank distress announcements on the stock prices of firms maintaining a relationship with a distressed bank. We find that although banks experience large and permanent downward revisions in their equity value during the event period, firms maintaining relationships with these banks face only small and temporary changes, on average, in stock price. In other words, the aggregate impact of bank distress on the real economy appears small. We analyze the cross-sectional variation in firm abnormal returns and find that firms that maintain international bank relationships suffer more upon announcement of bank distress.
(This abstract was borrowed from another version of this item.)
(This abstract was borrowed from another version of this item.)

Suggested Citation

  • Ongena, S. & Smith, D.C. & Michalsen, D., 2000. "Distressed Relationships : Lessons from the Norwegian Banking Crisis," Discussion Paper 2000-13, Tilburg University, Center for Economic Research.
    • Handle: RePEc:tiu:tiucen:6fd91902-4eb3-4c5e-9377-27af0be62102
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    Cited by:

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    3. Øyvind Bøhren & Bernt Arne Ødegaard, 2001. "Patterns of Corporate Ownership: Insights from a unique data set," Nordic Journal of Political Economy, Nordic Journal of Political Economy, vol. 27, pages 55-86.
    4. Nancy Silva, 2008. "Deposit Insurance, Moral Hazard and the Risk of Runs," Working Papers Central Bank of Chile 474, Central Bank of Chile.

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    More about this item

    Keywords

    bank relationship; bank distress; Norwegian banking crisis;
    All these keywords.

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • C41 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Duration Analysis; Optimal Timing Strategies

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