Abstract
We analyze the credit supply and real effects of bank bail-ins by exploiting the unexpected failure and subsequent resolution of a major Portuguese bank. Using loan-level data, we show that while firms more exposed to the bail-in suffered a significant contraction of credit at the intensive margin, they were on average able to compensate for the supply-driven shock. However, affected SMEs experienced a binding reduction of funds available through credit lines, and those with lower internal liquidity increased precautionary cash holdings and reduced investment and employment. Our results highlight the trade-off policymakers face when considering this new bank resolution mechanism.
Original language | English |
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Pages (from-to) | 1747-1788 |
Number of pages | 42 |
Journal | Review Of Financial Studies |
Volume | 34 |
Issue number | 4 |
DOIs | |
Publication status | Published - 1 Apr 2021 |