This paper shows that the sovereign debt crisis and the resulting credit crunch in the periphery of the Eurozone lead to negative real effects for borrowing firms. Using a hand matched sample of loan information from Dealscan and accounting information from Amadeus, we show that firms with a higher exposure to banks affected by the sovereign debt crisis become financially constrained during the crisis. As a result, these firms have significantly lower employment growth, capital expenditures, and sales growth rates. We show that our results are not driven by country or industry-specific macroeconomic shocks or a change in the demand for credit of borrowing firms. Thus, the high interdependence of bank and sovereign health and the resulting credit crunch is one important contributor to the severe economic downturn in the southern European countries during the sovereign debt crisis.
–Viral V. Acharyaa, Tim Eisertb, Christian Eungerc, Christian Hirschd
Continue reading "Real Effects of the Sovereign Debt Crisis in Europe: Evidence from Syndicated Loans" »
The authors appreciate helpful comments from Matteo Crosignani, Giovanni Dell'Ariccia, Daniela Fabbri, Rainer Haselmann, Jhangkai Huang, Yi Huang, Victoria Ivashina, Augustin Landier, and Marco Pagano, Sjoerd van Bekkum, as well as from conference participants at the 2014 EFA Meeting, the Bank performance, financial stability and the real economy conference (Naples, Italy), and at the International Conference on Financial Market Reform and Regulation (Beijing, China) and seminar participants in Mainz, Konstanz, at the European Central Bank, and at the 2014 Tsinghua Finance Workshop. Eisert is grateful for financial support by the German National Scientific Foundation. Hirsch gratefully acknowledges support from the Research Center SAFE, funded by the State of Hessen initiative for research Loewe. Email addresses: firstname.lastname@example.org (Viral V. Acharya), email@example.com (Tim Eisert), firstname.lastname@example.org (Christian Eunger), email@example.com (Christian Hirsch)
aNew York University, CEPR, and NBER bErasmus University Rotterdam cIESE Business School dGoethe University Frankfurt and SAFE