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Original title:
Quo vadis? Evidence on new firm-bank matching and firm performance following “sin” bank closures
Authors: Goncharenko, R. ; Mamonov, Mikhail ; Ongena, S. ; Popova, S. ; Turdyeva, N.
Document type: Research reports
Year: 2023
Language: eng
Series: CERGE-EI Working Paper Series, volume: 754
Abstract: In this paper, we analyze how firms search for new lenders after a financial regulator forcibly closes their prior banks, and what happens to the firms’ performance during this transition period. In 2013, the Central Bank of Russia launched a large-scale bank closure policy and started detecting fraudulent (sin) banks and revoking their licenses. By 2020, two-thirds of all operating banks had been shuttered. We analyze this unique period in history using credit register data. First, we establish that before sin bank closures, there was no informational leakage and the borrowing firms remain unaffected. After the closures, there is a clear sorting pattern: poorly-performing firms rush to other (not-yet-detected) sin banks, while profitable firms transfer to financially solid banks. We find that the coupling of poorly-performing firms and not-yet-detected sin banks occurs more frequently when the two sin banks (the prior and the next lender) are commonly owned or when the local banking market is unconcentrated. Finally, we show that during the transition period (i.e., after the sin bank closures and before matching to new banks), poorly-performing firms shrink in size and experience a sharp decline in borrowings and market sales, whereas profitable firms strengthen in terms of employment, investment, and market sales. A potential mechanism involves credit risk underpricing by sin banks: we find that poorly-performing firms (especially commonly owned) received loans at lower interest rates than profitable firms prior to sin bank closures.
Keywords: bank clean-up; credit register; regulatory forbearance
Project no.: LX22NPO5101
Funding provider: GA MŠk
Institution: Economics Institute AS ČR (web)
Document availability information: Fulltext is available at external website.
External URL: https://www.cerge-ei.cz/pdf/wp/Wp754.pdf
Original record: https://hdl.handle.net/11104/0343794
Permalink: http://www.nusl.cz/ntk/nusl-528168
The record appears in these collections:
Research > Institutes ASCR > Economics Institute
Reports > Research reports
Authors: Goncharenko, R. ; Mamonov, Mikhail ; Ongena, S. ; Popova, S. ; Turdyeva, N.
Document type: Research reports
Year: 2023
Language: eng
Series: CERGE-EI Working Paper Series, volume: 754
Abstract: In this paper, we analyze how firms search for new lenders after a financial regulator forcibly closes their prior banks, and what happens to the firms’ performance during this transition period. In 2013, the Central Bank of Russia launched a large-scale bank closure policy and started detecting fraudulent (sin) banks and revoking their licenses. By 2020, two-thirds of all operating banks had been shuttered. We analyze this unique period in history using credit register data. First, we establish that before sin bank closures, there was no informational leakage and the borrowing firms remain unaffected. After the closures, there is a clear sorting pattern: poorly-performing firms rush to other (not-yet-detected) sin banks, while profitable firms transfer to financially solid banks. We find that the coupling of poorly-performing firms and not-yet-detected sin banks occurs more frequently when the two sin banks (the prior and the next lender) are commonly owned or when the local banking market is unconcentrated. Finally, we show that during the transition period (i.e., after the sin bank closures and before matching to new banks), poorly-performing firms shrink in size and experience a sharp decline in borrowings and market sales, whereas profitable firms strengthen in terms of employment, investment, and market sales. A potential mechanism involves credit risk underpricing by sin banks: we find that poorly-performing firms (especially commonly owned) received loans at lower interest rates than profitable firms prior to sin bank closures.
Keywords: bank clean-up; credit register; regulatory forbearance
Project no.: LX22NPO5101
Funding provider: GA MŠk
Institution: Economics Institute AS ČR (web)
Document availability information: Fulltext is available at external website.
External URL: https://www.cerge-ei.cz/pdf/wp/Wp754.pdf
Original record: https://hdl.handle.net/11104/0343794
Permalink: http://www.nusl.cz/ntk/nusl-528168
The record appears in these collections:
Research > Institutes ASCR > Economics Institute
Reports > Research reports
Record created 2023-07-09, last modified 2024-04-15