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The Loan Covenant Channel: How Bank Health Transmits to the Real Economy / Gabriel Chodorow-Reich, Antonio Falato.
- Format:
- Book
- Author/Creator:
- Chodorow-Reich, Gabriel.
- Series:
- Working Paper Series (National Bureau of Economic Research) no. w23879.
- NBER working paper series no. w23879
- Language:
- English
- Physical Description:
- 1 online resource: illustrations (black and white);
- Other Title:
- Loan Covenant Channel
- Place of Publication:
- Cambridge, Mass. National Bureau of Economic Research 2017.
- Summary:
- We document the importance of covenant violations in transmitting bank health to non-financial firms using a new supervisory data set of bank loans. Roughly one-third of loans in our data breach a covenant during the 2008-09 period, providing lenders the opportunity to force a renegotiation of loan terms or to accelerate repayment of otherwise long-term credit. Lenders in worse health are more likely to force a reduction in the loan commitment following a violation. The reduction in credit to borrowers who violate a covenant accounts for the majority of the cross-sectional variation in credit supply during the 2008-09 crisis.
- Notes:
- Print version record
- September 2017.
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