Corporate Debt Maturity and the Real Effects of the 2007 Credit Crisis

Almeida, Heitor; Campello, Murillo; Laranjeira, Bruno; Weisbenner, Scott J.

doi:10.1561/104.00000001

“…We start by estimating a linear probability model for exit in 2010 with respect to 2006, using the same specification as in our baseline DD equation (1). The sample consists of the 170,457 firms with either a positive employment level or a zero level of employment in 2010 because the firm is known not to have survived the crisis.…”

Section: Probability Of Exitmentioning

confidence: 99%

When Credit Dries Up: Job Losses in the Great Recession

Bentolila

¹

,

Jansen

²

,

Jiménez

³

et al. 2017

Journal of the European Economic Association

View full text Add to dashboard Cite

Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. We use a unique dataset to estimate the impact of a large credit supply shock on employment in Spain. We exploit marked differences in banks' health at the onset of the Great Recession. Several weak banks were rescued by the State and they reduced credit more than other banks. We compare employment changes from 2006 to 2010 at firms heavily indebted to weak banks before the crisis and the rest. Our estimates imply that these firms suffered an additional employment drop between 3 and 13.5 percentage points due to weak-bank attachment, representing between 8% and 36% of aggregate job losses. JEL-Code: D920, G330, J230. Terms of use: Documents in EconStor may

show abstract

“…The expected sign in this case is 9 Calvo (2010) advances the idea that some of the recent financial crises, such as the subprime crisis in the United States as well as the Argentine crisis, were credit supply-driven. Almeida et al (2009) discuss the difficulty of establishing whether credit crunches are a consequence of supply or demand shifts, concluding, based on a careful microdata analysis, that the U.S. crisis was triggered by a contraction in the supply of loans. 10 A crisis dummy variable is another option.…”

Section: Empirical Approachmentioning

confidence: 99%

Firm Size and Credit in Argentina

Auguste

¹

,

Bebczuk

²

,

Sanchez

³

2013

View full text Add to dashboard Cite

Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. The opinions expressed in this publication are those of the authors and do not necessarily reflect the views of the Inter-American Development Bank, its Board of Directors, or the countries they represent. Terms of use: Documents inThe unauthorized commercial use of Bank documents is prohibited and may be punishable under the Bank's policies and/or applicable laws. Copyright ©Inter-American Development Bank. This working paper may be reproduced for any non-commercial purpose. It may also be reproduced in any academic journal indexed by the American Economic Association's EconLit, with previous consent by the Inter-American Development Bank (IDB), provided that the IDB is credited and that the author(s) receive no income from the publication. Cataloging-in-Publication AbstractThe goal of this paper is to study the link between bank credit (and internal funding) and average firm size in Argentina. Besides the fact that economic growth tends to go hand in hand with larger firm size, the topic is of particular interest because of the severe credit crunch in Argentina in the aftermath of the 2001-2002 financial crisis. To this end, a novel three-digit industry-level dataset spanning the 2000-2010 period was constructed. The results confirm the expected positive impact of credit supply on average firm size. Furthermore, the study expands on common knowledge by testing the sensitivity of firm size to internal funding and the differential financing behavior of the primary and the manufacturing sector. The results do not seem to be driven by endogeneity bias.JEL classifications: D22, D23, G21, G32

show abstract

“…In this section, we extend the baseline 2-state model to capture lumpy maturity structures, which is not only a common feature in the data, but can be a key determinant of firms' financial constraints (see Almeida, Campello, Laranjeira, and Weisbenner (2011)). We use this extension to demonstrate how dramatic maturity reductions can occur realistically, and how they affect the term structure of credit risk.…”

Section: A Lumpy Maturity Structurementioning

confidence: 99%

“…We follow Almeida, Campello, Laranjeira, and Weisbenner (2011) We then examine the cross-sectional relation between the changes in the CDS spreads from 2007 to 2008 (using the CDS spreads with maturity 1 year, 5 years, and 10 years respectively) and firms' maturity structures in 2007. The financial crisis could exacerbate default risk through other firm characteristics.…”

Section: Term Structure Of Credit Spreadsmentioning

confidence: 99%

“…This feature is prevalent in practice (see Choi, Hackbarth, and Zechner (2012)). In their study of the real effects of financial frictions, Almeida, Campello, Laranjeira, and Weisbenner (2011) exploit this feature to identify firms most exposed to rollover risk. Our model shows that lumpiness in the maturity structure interacted with time-varying macroeconomic conditions has rich implications for credit risk.…”

Section: Introductionmentioning

confidence: 99%

See 1 more Smart Citation

Systematic Risk, Debt Maturity, and the Term Structure of Credit Spreads

Chen¹,

Xu

²

,

Yang

³

2012

View full text Add to dashboard Cite

We build a dynamic capital structure model to study the link between firms' systematic risk exposures and their time-varying debt maturity choices, as well as its implications for the term structure of credit spreads. Compared to short-term debt, long-term debt helps reduce rollover risks, but its illiquidity raises the costs of financing. With both default risk and liquidity costs changing over the business cycle, our calibrated model implies that debt maturity is pro-cyclical, firms with high systematic risk favor longer debt maturity, and that these firms will have more stable maturity structures over the cycle. Moreover, pro-cyclical maturity variation can significantly amplify the impact of aggregate shocks on the term structure of credit spreads, especially for firms with high beta, high leverage, or a lumpy maturity structure. We provide empirical evidence for the model predictions on both debt maturity and credit spreads.

show abstract

Corporate Debt Maturity and the Real Effects of the 2007 Credit Crisis

Cited by 461 publications

References 42 publications

When Credit Dries Up: Job Losses in the Great Recession

When Credit Dries Up: Job Losses in the Great Recession

Firm Size and Credit in Argentina

Systematic Risk, Debt Maturity, and the Term Structure of Credit Spreads

Contact Info

Product

Resources

About