Arbeitspapier
Credit Misallocation During the European Financial Crisis
Do banks with low capital extend excessive credit to weak firms, and does this matter for aggregate efficiency? Using a unique data set that covers almost all bank-firm relationships in Italy in the period 2004-2013, we find that, during the Eurozone financial crisis: (i) Under-capitalized banks were less likely to cut credit to non-viable firms. (ii) Credit misallocation increased the failure rate of healthy firms and reduced the failure rate of non viable firms. (iii) Nevertheless, the adverse effects of credit misallocation on the growth rate of healthier firms were negligible, and so were the effects on TFP dispersion. This goes against previous inuential findings that, we argue, face serious identification problems. Thus, while banks with low capital can be an important source of aggregate inefficiency in the long run, their contribution to the severity of the great recession via capital misallocation was modest.
- Language
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Englisch
- Bibliographic citation
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Series: CESifo Working Paper ; No. 6406
- Classification
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Wirtschaft
Organizational Behavior; Transaction Costs; Property Rights
Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
Banks; Depository Institutions; Micro Finance Institutions; Mortgages
- Subject
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bank capitalization
zombie lending
capital misallocation
- Event
-
Geistige Schöpfung
- (who)
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Schivardi, Fabiano
Sette, Enrico
Tabellini, Guido
- Event
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Veröffentlichung
- (who)
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Center for Economic Studies and ifo Institute (CESifo)
- (where)
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Munich
- (when)
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2017
- Handle
- Last update
-
10.03.2025, 11:44 AM CET
Data provider
ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften - Leibniz-Informationszentrum Wirtschaft. If you have any questions about the object, please contact the data provider.
Object type
- Arbeitspapier
Associated
- Schivardi, Fabiano
- Sette, Enrico
- Tabellini, Guido
- Center for Economic Studies and ifo Institute (CESifo)
Time of origin
- 2017
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