Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/153686
Authors: 
Ongena, Steven
Popov, Alexander
Year of Publication: 
2010
Series/Report no.: 
ECB Working Paper 1252
Abstract: 
We study the effect of interbank market integration on small firm finance in the build-up to the 2007-2008 financial crisis. We use a comprehensive data set that contains contract terms on individual loans to 6,047 firms across 14 European countries between 1998:01 and 2005:12. We account for the selection that arises in the loan request and approval process. Our findings imply that integration of interbank markets resulted in less stringent borrowing constraints and in substantially lower loan rates. The decrease was strongest in markets with competitive banking sectors. We also find that in the most rapidly integrating markets, firms became substantially overleveraged during the build-up to the crisis.
Subjects: 
Bank competition
firm leverage
Interbank markets
loan rates
selection
JEL: 
E51
G15
G21
G34
Document Type: 
Working Paper

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