Author: Horacio Sapriza / Topic: Credit

Author:: Ricardo Correa, Kuan-Hui Lee, Horacio Sapriza, and Gustavo Suarez
Publication Date:: 12-2012
Content Type:: Working Paper
Institution:: Board of Governors of the Federal Reserve System
Abstract:: We explore the joint effect of expected government support to banks and changes in sovereign credit ratings on bank stock returns using data for banks in 37 countries between 1995 and 2011. We find that sovereign credit rating downgrades have a large negative effect on bank stock returns for those banks that are expected to receive stronger support from their governments. This result is stronger for banks in advanced economies where governments are better-positioned to provide that support. Our results suggest that stock market investors perceive sovereigns and domestic banks as markedly interconnected, partly through government guarantees.
Topic:: Sovereignty, Governance, Risk, Credit, Bonds, and Stock Markets
Political Geography:: Global Focus

Author:: Brahima Coulibaly, Horacio Sapriza, and Andrei Zlate
Publication Date:: 06-2011
Content Type:: Working Paper
Institution:: Board of Governors of the Federal Reserve System
Abstract:: This paper studies the role of the credit crunch in the severe contraction of economic activity during the 2008-09 global financial crisis, using firm-level data from six emerging Asian economies. After controlling for the effect of falling demand, we find that sales declined by less for firms with better pre-crisis financial conditions. Amid the decline in external financing opportunities, some firms relied more on trade credit from suppliers during the crisis, which allowed them to post relatively better sales. Export-intensive firms resorted less to trade credit as an alternative source of finance, which contributed to their larger declines in sales.
Topic:: Finance, Global Financial Crisis, Trade, and Credit
Political Geography:: Global Focus

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