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Distressed banks, distorted decisions?

Anderson, Gareth, Riley, Rebecca and Young, Garry (2019) Distressed banks, distorted decisions? CFM discussion paper series (CFM-DP2019-08). Centre For Macroeconomics, London School of Economics and Political Science, London, UK.

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Abstract

Exploiting differences in pre-crisis business banking relationships, we present evidence to suggest that restricted credit availability following the 2008 financial crisis increased the rate of business failure in the United Kingdom. But rather than "cleansing the economy by accelerating the exit of the least productive businesses, we find that tighter credit conditions resulted in some businesses failing despite being more productive than their surviving competitors. We also find evidence that distressed banks protected highly leveraged, low productivity businesses from failure.

Item Type: Monograph (Discussion Paper)
Official URL: http://www.centreformacroeconomics.ac.uk/Home.aspx
Additional Information: © 2019 The Authors
Divisions: Centre for Macroeconomics
Subjects: H Social Sciences > HG Finance
JEL classification: D - Microeconomics > D2 - Production and Organizations > D24 - Production; Cost; Capital and Total Factor Productivity; Capacity
G - Financial Economics > G2 - Financial Institutions and Services > G21 - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
G - Financial Economics > G3 - Corporate Finance and Governance > G30 - General
L - Industrial Organization > L1 - Market Structure, Firm Strategy, and Market Performance > L10 - General
Date Deposited: 05 Jun 2019 09:27
Last Modified: 11 Oct 2019 23:26
URI: http://eprints.lse.ac.uk/id/eprint/100947

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