Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/265427 
Year of Publication: 
2022
Series/Report no.: 
IWH Discussion Papers No. 24/2022
Publisher: 
Halle Institute for Economic Research (IWH), Halle (Saale)
Abstract: 
We use granular project-level information for the largest regional economic development program in German history to study whether government subsidies to firms affect the quantity and quality of bank lending. We combine the universe of recipient firms under the Improvement of Regional Economic Structures program (GRW) with their local banks during 1998-2019. The modalities of GRW subsidies to firms are determined at the EU level. Therefore, we use it to identify bank outcomes. Banks with relationships to more subsidized firms exhibit higher lending volumes without any significant differences in bank stability. Subsidized firms, in turn, borrow more indicating that banks facilitate regional economic development policies.
Subjects: 
bank stability
financial intermediation
government subsidies
JEL: 
G21
G28
H25
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

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