Credit Crunch Caused by Bank Failures and Self‐Selection Behavior in Lending Markets |
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Authors: | NAOAKI MINAMIHASHI |
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Affiliation: | Naoaki Minamihashi is a PhD Candidate, Boston University, Department of Economics (E‐mail: naoaki@bu.edu). |
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Abstract: | This study investigates how bank failures affect the real economy from the lenders’ perspective. Using experimental settings of unique bank failures in Japan, this paper identifies the credit crunch effect by bank failures. The main findings are the following. First, bank failures decrease the investments of the client firms by approximately 30%. Second, the high investment growth/level firms deal with unhealthy banks. These choices generate a self‐selection bias of 30–80%. Third, there is no evidence that bank‐failure shock is related to the firms’ accessibility to other financial sources. |
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Keywords: | E22 G21 G33 bank failures investment credit crunch self‐selection treatment effects |
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