Bank Ratings and Lending Supply: Evidence from Sovereign Downgrades

We study the causal effect of bank credit rating downgrades on the supply of bank lending. The identification strategy exploits the asymmetric impact of sovereign downgrades on the ratings of banks at the sovereign bound relative to banks that are not at the bound as a result of rating agencies'...

Full description

Saved in:
Bibliographic Details
Published in:The Review of financial studies 2016-07, Vol.29 (7), p.1709-1746
Main Authors: Adelino, Manuel, Ferreira, Miguel A.
Format: Article
Language:English
Subjects:
Bank assets
Bank liquidity
Bank loans
Bank ratings
Banking crises
Banks
Borrowing
Countries
Funding
Lenders
Lending institutions
Loan rates
Loans
Studies
Citations: Items that this one cites
Items that cite this one
Online Access:Get full text
Tags: Add Tag
No Tags, Be the first to tag this record!
Description
Summary:We study the causal effect of bank credit rating downgrades on the supply of bank lending. The identification strategy exploits the asymmetric impact of sovereign downgrades on the ratings of banks at the sovereign bound relative to banks that are not at the bound as a result of rating agencies' sovereign ceiling policies. This asymmetric effect leads to greater reductions in ratings-sensitive funding and lending of banks at the bound relative to other banks. Results for foreign borrowers and within lender-borrower relationships confirm that credit demand does not explain our findings.
ISSN:0893-9454
1465-7368
DOI:10.1093/rfs/hhw004