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Quo vadis? Evidence on new firm-bank matching and firm performance following “sin” bank closures
Goncharenko, R. ; Mamonov, Mikhail ; Ongena, S. ; Popova, S. ; Turdyeva, N.
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.
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“Crime and punishment”? How banks anticipate and propagate global financial sanctions
Mamonov, Mikhail ; Pestova, Anna ; Ongena, S.
We study the impacts of global financial sanctions on banks and their corporate borrowers in Russia. Financial sanctions were imposed consecutively between 2014 and 2019, allowing targeted (but not-yet-sanctioned) banks to adapt their international and domestic exposures in advance. Using a staggered difference-in-differences approach with in-advance adaptation to anticipated treatment, we establish that targeted banks immediately reduced their foreign assets and actually increased their international borrowings after the first sanction announcement compared to other similar banks. We reveal that the added value of the next sanction announcements was rather limited. Despite considerable outflow of domestic private deposits, the government support prevented disorderly bank failures and resulted in credit reshuffling: the banks contracted corporate lending by 4% of GDP and increased household lending by almost the same magnitude, which mostly offset the total economic loss. Further, we introduce a two-stage treatment diffusion approach that flexibly addresses potential spillovers of the sanctions to private banks with political connections. Employing unique hand-collected board membership and bank location data, our approach shows that throughout this period, politically-connected banks were not all equally recognized as potential sanction targets. Finally, using syndicated loan data, we establish that the real negative effects of sanctions materialized only when sanctioned firms were borrowing from sanctioned banks. When borrowing from unsanctioned banks, sanctioned firms even gained in terms of employment and investment but still lost in terms of market sales pointing to a misallocation of government support.
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Essays in Corporate Finance
Joeveer, Karin ; Jurajda, Štěpán (vedoucí práce) ; Ongena, Steven (oponent) ; Kotrba, Josef (oponent)
This dissertation consists of three essays about firm financing. The first essay detects the bank-firm relationship in a transition country while the second and third essays address the importance of country factors in a company's capital structure decisions. The question of the extent in which the financial sector problems "spill over" to firms is an important issue to study and it is particularly under-explored in the context of transition economies, where the financial systems are fragile. In my first essay I study the effect of an Estonian bank's failure in 1998 on its corporate loan clients by comparing the performance of clients to that of a random sample of other firms. First, I analyze whether bank bankruptcy causes the bankruptcy of client firms. I find that client firms are less likely to survive until 2000 even after controlling for their pre- bank bankruptcy performance. Second, I analyze the behavior of firms' profitability, liquidity, and growth of fixed assets. I find liquidity to be the only variable that decreases for the client firms compared to the control firms after the bank bankruptcy. In my second essay I evaluate the importance of firm-specific, country- institutional and macroeconomic factors in explaining the firm leverage variation simultaneously. I use a large European...
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Monetary Conditions and Banks’ Behaviour in the Czech Republic
Geršl, Adam ; Jakubík, Petr ; Kowalczyk, Dorota ; Ongena, Steven ; Alcalde, José-Luis Peydró
Článek zkoumá vliv měnových podmínek na přijímání rizika bankami (risk taking) v ČR. Pro analýzu jsou využita data z úvěrového registru vedeného ČNB. Analýza založená na sledování jednotlivých úvěrů v čase (duration analysis) ukazuje, že uvolněné měnové podmínky podporují přijímání rizika bankami. Zároveň však nízké úrokové sazby v průběhu trvání úvěru snižují jeho rizikovost. V rámci analýzy vzájemného vztahu mezi sklonem bank přijímat riziko a úrovní krátkodobých úrokových sazeb jsou dále řešeny otázky vztahující se k likviditnímu versus úvěrovému riziku, jakož i otázka vlivu měnověpolitické sazby v závislosti na charakteristikách banky a dlužníků.
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