Working Papers
Bank Loan Supply During Crises: The Importance of Geographic Diversification (with Sebastian Doerr)
We classify a large sample of banks according to the geographic diversification of their international syndicated loan portfolio. Our results show that diversified banks maintain higher loan supply during banking crises in borrower countries. The positive loan supply effects lead to higher investment and employment growth for firms. Diversified banks are stabilizing due to their ability to raise additional funding during times of distress, which also shields connected markets from spillovers. Further distinguishing banks by nationality reveals a pecking order: diversified domestic banks are the most stable source of funding, while foreign banks with little diversification are the most fickle. Our findings suggest that the decline in financial integration since the recent crisis increases countries' vulnerability to local shocks.
Link to paper: PDF SSRN
The Real Effects of Financial Protectionism
This paper analyzes the effects of government support of banks on European financial integration and firm outcomes using data on syndicated lending. Results show that banks increase their home bias in lending by 24.6%, after receiving government support. In turn, discriminated foreign firms can only imperfectly substitute this fall in lending by switching banks or issuing corporate bonds. Thus, the negative loan supply effect translates into lower sales and employment growth for foreign firms. In addition, government support distorts credit allocation in the home market by shifting lending to larger, safer and less innovative firms. Moreover, I document that politicians gain influence over banks by transferring control rights to the government as part of the support scheme. These results suggest that locating bank resolution within the European Banking Union at the national level discourages international economic activity, distorts credit towards less productive firms and harms growth.
Link to paper: PDF SSRN
Work in Progress
Bank Specialization and Spillover Effects (with Ana Boskovic and Sebastian Doerr)
Bank Bailouts and Political Connections (with Pia Hüttl)
Bank Loan Supply During Crises: The Importance of Geographic Diversification (with Sebastian Doerr)
We classify a large sample of banks according to the geographic diversification of their international syndicated loan portfolio. Our results show that diversified banks maintain higher loan supply during banking crises in borrower countries. The positive loan supply effects lead to higher investment and employment growth for firms. Diversified banks are stabilizing due to their ability to raise additional funding during times of distress, which also shields connected markets from spillovers. Further distinguishing banks by nationality reveals a pecking order: diversified domestic banks are the most stable source of funding, while foreign banks with little diversification are the most fickle. Our findings suggest that the decline in financial integration since the recent crisis increases countries' vulnerability to local shocks.
Link to paper: PDF SSRN
The Real Effects of Financial Protectionism
This paper analyzes the effects of government support of banks on European financial integration and firm outcomes using data on syndicated lending. Results show that banks increase their home bias in lending by 24.6%, after receiving government support. In turn, discriminated foreign firms can only imperfectly substitute this fall in lending by switching banks or issuing corporate bonds. Thus, the negative loan supply effect translates into lower sales and employment growth for foreign firms. In addition, government support distorts credit allocation in the home market by shifting lending to larger, safer and less innovative firms. Moreover, I document that politicians gain influence over banks by transferring control rights to the government as part of the support scheme. These results suggest that locating bank resolution within the European Banking Union at the national level discourages international economic activity, distorts credit towards less productive firms and harms growth.
Link to paper: PDF SSRN
Work in Progress
Bank Specialization and Spillover Effects (with Ana Boskovic and Sebastian Doerr)
Bank Bailouts and Political Connections (with Pia Hüttl)
