Shocks Abroad, Pain at Home? Bank-firm Level Evidence on the International Transmission of Financial Shocks

S. Ongena, J.L. Peydro, N. van Horen

Research output: Working paperDiscussion paperOther research output

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Abstract

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.
Original languageEnglish
Place of PublicationTilburg
PublisherEBC
Number of pages45
Volume2013-007
Publication statusPublished - 2013

Publication series

NameEBC Discussion Paper
Volume2013-007

Fingerprint

International transmission
Financial shocks
Pain
Credit
Borrowing
Firm-level data
Real sector
Financing
Financial globalization
Small firms
Foreign banks
Intangible assets
Small and medium-sized firms
Banking
Global financial crisis
Central Asia
Eastern Europe
Bank-firm relationships

Keywords

  • international transmission
  • firm real effects
  • foreign banks
  • international wholesale funding
  • credit shock

Cite this

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. (EBC Discussion Paper; Vol. 2013-007). Tilburg: EBC.
Ongena, S. ; Peydro, J.L. ; van Horen, N. / Shocks Abroad, Pain at Home? Bank-firm Level Evidence on the International Transmission of Financial Shocks. Tilburg : EBC, 2013. (EBC Discussion Paper).
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Ongena, S, Peydro, JL & van Horen, N 2013 'Shocks Abroad, Pain at Home? Bank-firm Level Evidence on the International Transmission of Financial Shocks' EBC Discussion Paper, vol. 2013-007, EBC, Tilburg.

Shocks Abroad, Pain at Home? Bank-firm Level Evidence on the International Transmission of Financial Shocks. / Ongena, S.; Peydro, J.L.; van Horen, N.

Tilburg : EBC, 2013. (EBC Discussion Paper; Vol. 2013-007).

Research output: Working paperDiscussion paperOther research output

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T1 - Shocks Abroad, Pain at Home? Bank-firm Level Evidence on the International Transmission of Financial Shocks

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N2 - 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.

AB - 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.

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KW - firm real effects

KW - foreign banks

KW - international wholesale funding

KW - credit shock

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PB - EBC

CY - Tilburg

ER -

Ongena S, Peydro JL, van Horen N. Shocks Abroad, Pain at Home? Bank-firm Level Evidence on the International Transmission of Financial Shocks. Tilburg: EBC. 2013. (EBC Discussion Paper).