Bank ratings and lending supply: Evidence from sovereign downgrades

Journal Article (Review;Journal)

We study the causal effect of bank credit rating downgrades on the supply of bank lending. The identification strategy exploits the asymmetric impact of sovereign downgrades on the ratings of banks at the sovereign bound relative to banks that are not at the bound as a result of rating agencies' sovereign ceiling policies. This asymmetric effect leads to greater reductions in ratings-sensitive funding and lending of banks at the bound relative to other banks. Results for foreign borrowers and within lender-borrower relationships confirm that credit demand does not explain our findings.

Full Text

Duke Authors

Cited Authors

  • Adelino, M; Ferreira, MA

Published Date

  • July 1, 2016

Published In

Volume / Issue

  • 29 / 7

Start / End Page

  • 1709 - 1746

Electronic International Standard Serial Number (EISSN)

  • 1465-7368

International Standard Serial Number (ISSN)

  • 0893-9454

Digital Object Identifier (DOI)

  • 10.1093/rfs/hhw004

Citation Source

  • Scopus