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Bank Quality, Judicial Efficiency and Borrower Runs: Loan Repayment Delays in Italy / Fabio Schiantarelli, Massimiliano Stacchini, Philip E. Strahan.
- Format:
- Book
- Author/Creator:
- Schiantarelli, Fabio.
- Series:
- Working Paper Series (National Bureau of Economic Research) no. w22034.
- NBER working paper series no. w22034
- Language:
- English
- Physical Description:
- 1 online resource: illustrations (black and white);
- Other Title:
- Bank Quality, Judicial Efficiency and Borrower Runs
- Place of Publication:
- Cambridge, Mass. National Bureau of Economic Research 2016.
- Summary:
- Exposure to liquidity risk makes banks vulnerable to runs from both depositors and from wholesale, short-term investors. This paper shows empirically that banks are also vulnerable to run-like behavior from borrowers who delay their loan repayments (default). Firms in Italy defaulted more against banks with high levels of past losses. We control for borrower fundamentals with firm-quarter fixed effects; thus, identification comes from a firm's choice to default against one bank versus another, depending upon their health. This `selective' default increases where legal enforcement is weak. Poor enforcement thus can create a systematic loan risk by encouraging borrowers to default en masse once the continuation value of their bank relationships comes into doubt.
- Notes:
- Print version record
- February 2016.
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