Abstract: We study the international transmission of shocks from the banking to the real sector during the global financial crisis. For identification, we use matched bank-firm level data, including many small and medium-sized firms, in Eastern Europe and Central Asia. We find that internationally-borrowing domestic and foreign-owned banks contract their credit more during the crisis than domestic banks that are funded only locally. Firms that are dependent on credit and at the same time have a relationship with an internationally-borrowing domestic or a foreign bank (as compared to a locally-funded domestic bank) suffer more in their financing and real performance. Single-bank-relationship firms, small firms and firms with intangible assets suffer most. For credit-independent firms, there are no differential effects. Our findings suggest that financial globalization has intensified the international transmission of financial shocks with substantial real consequences.
|Place of Publication||Tilburg|
|Number of pages||45|
|Publication status||Published - 2013|
|Name||CentER Discussion Paper|
- international transmission
- firm real effects
- foreign banks
- international wholesale funding
- credit shock
Ongena, S., Peydro, J. L., & van Horen, N. (2013). Shocks Abroad, Pain at Home? Bank-firm Level Evidence on the International Transmission of Financial Shocks. (CentER Discussion Paper; Vol. 2013-040). Tilburg: Finance.