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Local bank financial constraints and firm access to external finance

Paravisini, Daniel (2006) Local bank financial constraints and firm access to external finance. . (Unpublished)

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Abstract

This paper shows that financial constraints of local banks in emerging markets lead to underinvestment and credit constrained borrowers. I find that local bank lending is sensitive to an exogenous expansion in the availability of external financing. Using novel data to measure risk and return on marginal lending, I show that the profitability of loans does not decline during lending expansions. The resulting credit expansion leads to an increase in total borrower debt, 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: Monograph (Working Paper)
Additional Information: © 2006 The author
Library of Congress subject classification: H Social Sciences > HB Economic Theory
H Social Sciences > HG Finance
Journal of Economic Literature Classification System: 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
Sets: Departments > Finance
Collections > Economists Online
Rights: http://www.lse.ac.uk/library/usingTheLibrary/academicSupport/OA/depositYourResearch.aspx
Date Deposited: 16 Apr 2012 12:41
URL: http://eprints.lse.ac.uk/43109/

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