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10/13/2014

Real Eff ects of the Sovereign Debt Crisis in Europe: Evidence from Syndicated Loans


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ABSTRACT

AcharyaThis paper shows that the sovereign debt crisis and the resulting credit crunch in the periphery of the Eurozone lead to negative real e ffects 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 a ffected by the sovereign debt crisis become financially constrained during the crisis. As a result, these firms have signifi cantly lower employment growth, capital expenditures, and sales growth rates. We show that our results are not driven by country or industry-specifi c macroeconomic shocks or a change in the demand for credit of borrowing fi rms. 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.


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–Viral V. Acharyaa, Tim Eisertb, Christian Eu ngerc, Christian Hirschd

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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 Scientifi c Foundation. Hirsch gratefully acknowledges support from the Research Center SAFE, funded by the State of Hessen initiative for research Loewe. Email addresses: vacharya@stern.nyu.edu (Viral V. Acharya), eisert@ese.eur.nl (Tim Eisert), ceufinger@iese.edu (Christian Eu nger), hirsch@finance.uni-frankfurt.de (Christian Hirsch)

aNew York University, CEPR, and NBER bErasmus University Rotterdam cIESE Business School dGoethe University Frankfurt and SAFE

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