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Some borrowers are more equal than others : bank funding shocks and credit reallocation

(2020) REVIEW OF FINANCE. 24(1). p.1-43
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Abstract
This paper provides evidence on the strategic lending decisions made by banks facing a negative funding shock. Using bank–firm level credit data, we show that banks reallocate credit within their loan portfolio in at least three different ways. First, banks reallocate to sectors where they have a high market share. Second, they also reallocate to sectors in which they are more specialized. Third, they reallocate credit toward low-risk firms. These reallocation effects are economically large. A standard deviation increase in sector market share, sector specialization, or firm soundness reduces the transmission of the funding shock to credit supply by 22%, 8%, and 10%, respectively.
Keywords
Credit reallocation, Bank funding shock, Bank credit, Sector market share, Sector specialization, Firm risk, FIRM-LEVEL EVIDENCE, FINANCIAL CONSTRAINTS, INTERNATIONAL TRANSMISSION, LENDING RELATIONSHIPS, LOAN, MARKET, CRISIS, COMPETITION, MERGERS, RISK

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Citation

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MLA
De Jonghe, Olivier, et al. “Some Borrowers Are More Equal than Others : Bank Funding Shocks and Credit Reallocation.” REVIEW OF FINANCE, vol. 24, no. 1, 2020, pp. 1–43, doi:10.1093/rof/rfy040.
APA
De Jonghe, O., Dewachter, H., Mulier, K., Ongena, S., & Schepens, G. (2020). Some borrowers are more equal than others : bank funding shocks and credit reallocation. REVIEW OF FINANCE, 24(1), 1–43. https://doi.org/10.1093/rof/rfy040
Chicago author-date
De Jonghe, Olivier, Hans Dewachter, Klaas Mulier, Steven Ongena, and Glenn Schepens. 2020. “Some Borrowers Are More Equal than Others : Bank Funding Shocks and Credit Reallocation.” REVIEW OF FINANCE 24 (1): 1–43. https://doi.org/10.1093/rof/rfy040.
Chicago author-date (all authors)
De Jonghe, Olivier, Hans Dewachter, Klaas Mulier, Steven Ongena, and Glenn Schepens. 2020. “Some Borrowers Are More Equal than Others : Bank Funding Shocks and Credit Reallocation.” REVIEW OF FINANCE 24 (1): 1–43. doi:10.1093/rof/rfy040.
Vancouver
1.
De Jonghe O, Dewachter H, Mulier K, Ongena S, Schepens G. Some borrowers are more equal than others : bank funding shocks and credit reallocation. REVIEW OF FINANCE. 2020;24(1):1–43.
IEEE
[1]
O. De Jonghe, H. Dewachter, K. Mulier, S. Ongena, and G. Schepens, “Some borrowers are more equal than others : bank funding shocks and credit reallocation,” REVIEW OF FINANCE, vol. 24, no. 1, pp. 1–43, 2020.
@article{8608166,
  abstract     = {This paper provides evidence on the strategic lending decisions made by banks facing
a negative funding shock. Using bank–firm level credit data, we show that banks
reallocate credit within their loan portfolio in at least three different ways. First,
banks reallocate to sectors where they have a high market share. Second, they also
reallocate to sectors in which they are more specialized. Third, they reallocate credit
toward low-risk firms. These reallocation effects are economically large. A standard
deviation increase in sector market share, sector specialization, or firm soundness
reduces the transmission of the funding shock to credit supply by 22%, 8%, and
10%, respectively.},
  author       = {De Jonghe, Olivier and Dewachter, Hans and Mulier, Klaas and Ongena, Steven and Schepens, Glenn},
  issn         = {1572-3097},
  journal      = {REVIEW OF FINANCE},
  keywords     = {Credit reallocation,Bank funding shock,Bank credit,Sector market share,Sector specialization,Firm risk,FIRM-LEVEL EVIDENCE,FINANCIAL CONSTRAINTS,INTERNATIONAL TRANSMISSION,LENDING RELATIONSHIPS,LOAN,MARKET,CRISIS,COMPETITION,MERGERS,RISK},
  language     = {eng},
  number       = {1},
  pages        = {1--43},
  title        = {Some borrowers are more equal than others : bank funding shocks and credit reallocation},
  url          = {http://dx.doi.org/10.1093/rof/rfy040},
  volume       = {24},
  year         = {2020},
}

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