Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/89915
Authors: 
Balduzzi, Pierluigi
Brancati, Emanuele
Schiantarelli, Fabio
Year of Publication: 
2013
Series/Report no.: 
IZA Discussion Paper 7872
Abstract: 
We test whether financial fluctuations affect firms' decisions, through their impact on banks' cost of funding. We exploit two shocks to Italian bank CDS spreads and equity valuations: the 2007-2009 financial crisis and the 2010-2012 sovereign debt crisis. Using newly available data linking over 3,000, mostly privately-held, non-financial firms to their bank(s), we find that increases in Italian banks' CDS spreads and decreases in their equity valuations lead younger and smaller firms to cut investment, employment, and borrowing. We conclude that financial market fluctuations affect even private firms' real decisions by affecting the costs of funds of their banks.
Subjects: 
financial market shocks
banks
credit-default swaps
volatility
investment
employment
lending
JEL: 
D92
G21
J23
Document Type: 
Working Paper

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