No abstract

No abstract

Ontario for helpful comments. We also thank Ana Lariau Bolentini and Danilo Liberati for the helpful research assistance. NBER working papers are circulated for discussion and comment purposes. They have not been peer-reviewed or been subject to the review by the NBER Board of Directors that accompanies official NBER publications.

No abstract

Italian rms delay payment to banks weakened by past loan losses. Exploiting Credit Register data, we fully absorb borrower fundamentals with rm-quarter eects; thus, identication reects rm choices to delay payment to some banks but not others, depending upon their health. This selective delay occurs more where legal enforcement of collateral recovery is slow. Poor enforcement encourages borrowers not to pay, once the value of their bank relationship comes into doubt. Selective delays occur even by rms able to pay all lenders. Credit losses in Italy have thus been worsened by the combination of weak banks and weak legal enforcement. The long and deep recession after the nancial and foreign debt crises in Europe has left a legacy of non-performing loans on Italian banks' balance sheets. In December of 2015, bad loans summed to about 200 billion, a large gure that represents approximately 11% of the * Fabio Schiantarelli is with Boston College and IZA, Massimiliano Stacchini is with Bank of Italy, Philip E. Strahan is with Boston College and NBER. None of the authors received nancial support, other than their normal salaries from their institutions. The article has been reviewed by the Bank of Italy, but the views expressed in it are those of the authors' alone and do not necessarily represent those of the institutions with which they are aliated We are grateful to