Bank ratings and lending supply

Evidence from sovereign downgrades

Manuel Adelino, Miguel A. Ferreira

Research output: Contribution to journalReview article

25 Citations (Scopus)

Abstract

We study the causal effect of bank credit rating downgrades on the supply of bank lending. The identification strategy exploits the asymmetric impact of sovereign downgrades on the ratings of banks at the sovereign bound relative to banks that are not at the bound as a result of rating agencies' sovereign ceiling policies. This asymmetric effect leads to greater reductions in ratings-sensitive funding and lending of banks at the bound relative to other banks. Results for foreign borrowers and within lender-borrower relationships confirm that credit demand does not explain our findings.

Original languageEnglish
Pages (from-to)1709-1746
Number of pages38
JournalReview Of Financial Studies
Volume29
Issue number7
DOIs
Publication statusPublished - 2016

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