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Local bank financial constraints and firm access to external finance

Paravisini, Daniel (2008) Local bank financial constraints and firm access to external finance. Journal of Finance, 63 (5). pp. 2161-2193. ISSN 0022-1082

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Identification Number: 10.1111/j.1540-6261.2008.01393.x


I exploit the exogenous component of a formula-based allocation of government funds across banks in Argentina to test for financial constraints and underinvestment by local banks. Banks are found to expand lending by $0.66 in response to an additional dollar of external financing. Using novel data to measure risk and return on marginal lending, I show that the profitability of lending does not decline and total borrower debt increases during lending expansions, holding investment opportunities constant. Overall, financial shocks to constrained banks are found to have a quick, persistent, and amplified effect on the aggregate supply of credit.

Item Type: Article
Official URL:
Additional Information: © 2008 The American Finance Association
Divisions: Finance
Subjects: H Social Sciences > HB Economic Theory
H Social Sciences > HG Finance
JEL classification: D - Microeconomics > D8 - Information, Knowledge, and Uncertainty > D82 - Asymmetric and Private Information
E - Macroeconomics and Monetary Economics > E5 - Monetary Policy, Central Banking, and the Supply of Money and Credit > E50 - General
G - Financial Economics > G2 - Financial Institutions and Services > G21 - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
Date Deposited: 16 Apr 2012 12:39
Last Modified: 01 Jul 2024 21:33

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