Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/78082 
Year of Publication: 
1999
Series/Report no.: 
CFS Working Paper No. 2000/01
Publisher: 
Goethe University Frankfurt, Center for Financial Studies (CFS), Frankfurt a. M.
Abstract: 
This paper measures the economy-wide impact of bank distress on the loss of relationship benefits. We use the near-collapse of the Norwegian banking system during the period 1988 to 1991 to measure the impact of bank distress announcements on the stock prices of firms maintaining a relationship with a distressed bank. We find that although banks experience large and permanent downward revisions in their equity value during the event period, firms maintaining relationships with these banks face only small and temporary changes, on average, in stock price. In other words, the aggregate impact of bank distress on the real economy appears small. We analyze the cross-sectional variation in firm abnormal returns and find that firms that maintain international bank relationships suffer more upon announcement of bank distress.
Subjects: 
bank relationship
bank distress
Norwegian banking crisis
JEL: 
G21
C41
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

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