Shock contagion, asset quality and lending behavior
Pham, Tho; Talavera, Oleksandr; Tsapin, Andriy (29.11.2018)
Numero
21/2018Julkaisija
Bank of Finland
2018
Julkaisun pysyvä osoite on
https://urn.fi/URN:NBN:fi:bof-201811292147Tiivistelmä
This paper exploits the geopolitical conflict in Eastern Ukraine as a negative shock to banking sector and examines the shock transmission. We find that banks with more loans in the conflict areas during the pre-conflict period face a higher level of bad loans in other markets after the shock. This effect is stronger in the regional markets which are closer to the conflict zone. We also find evidence for the “flight to headquarters” effect in post-conflict lending. Specifically, while more affected banks tend to cut their credit supply, the larger contraction is observed in regional markets located farther from headquarters.
Sisällysluettelo
Abstract 4
1 Introduction 5
2 The geopolitical conflict between Ukraine and Russia 8
3 Data and empirical specification 9
3.1 Empirical methodology 9
3.1.1 Banks’ exposure to the geopolitical shock 9
3.1.2 Contagion of shock and post-conflict lending behaviour 10
3.2 Data sources and sample 11
4 Results 15
4.1 Which banks are more exposed to the geopolitical conflict? 15
4.2 How is the shock transmitted? 18
4.3 Lending behaviour after the shock 21
4.4 Controlling for credit demand 24
5 Conclusion 27
References 28
Appendix A 31
Appendix B Dataset construction 33
1 Introduction 5
2 The geopolitical conflict between Ukraine and Russia 8
3 Data and empirical specification 9
3.1 Empirical methodology 9
3.1.1 Banks’ exposure to the geopolitical shock 9
3.1.2 Contagion of shock and post-conflict lending behaviour 10
3.2 Data sources and sample 11
4 Results 15
4.1 Which banks are more exposed to the geopolitical conflict? 15
4.2 How is the shock transmitted? 18
4.3 Lending behaviour after the shock 21
4.4 Controlling for credit demand 24
5 Conclusion 27
References 28
Appendix A 31
Appendix B Dataset construction 33