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Shock Contagion, Asset Quality and Lending Behavior

Author

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  • Tho Pham

    () (School of Management, Swansea University)

  • Oleksandr Talavera

    (School of Management, Swansea University)

  • Andriy Tsapin

    () (National Bank of Ukraine
    National University of Ostroh Academy)

Abstract

We use the geopolitical conflict in eastern Ukraine as a negative shock to bank assets and examine the shock's impact on the banking sector. We find banks were more severely affected by the conflict if they had more loans outstanding in the conflict areas before the shock. These banks, consequently, are more likely to experience an increase in troubled assets and a reduction in credit supply. Further analysis offers evidence of the "flight to headquarters" effect in credit allocation wherein more affected banks cut lending by a greater amount in markets located farther from headquarters.

Suggested Citation

  • Tho Pham & Oleksandr Talavera & Andriy Tsapin, 2018. "Shock Contagion, Asset Quality and Lending Behavior," Working Papers 01/2018, National Bank of Ukraine.
  • Handle: RePEc:ukb:wpaper:01/2018
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    References listed on IDEAS

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    Cited by:

    1. Pham, Tho & Talavera, Oleksandr & Tsapin, Andriy, 2018. "Shock contagion, asset quality and lending behavior," BOFIT Discussion Papers 21/2018, Bank of Finland, Institute for Economies in Transition.

    More about this item

    Keywords

    geopolitical shock; credit allocation; asset quality; flight to headquarters; difference-in-differences;

    JEL classification:

    • G01 - Financial Economics - - General - - - Financial Crises
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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