Spillovers to small business credit risk
Do large credit risk shocks spill over to small businesses and affect their real economic activity? Using information on small business credit risk, we find that small businesses show increased default and bankruptcy rates following a shock to a customer industry. On an industry level, the shock to...
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| Veröffentlicht in: | Small business economics 2021-06, Vol.57 (1), p.323-352 |
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| container_title | Small business economics |
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| creator | Bams, Dennis Pisa, Magdalena Wolff, Christian C. P. |
| description | Do large credit risk shocks spill over to small businesses and affect their real economic activity? Using information on small business credit risk, we find that small businesses show increased default and bankruptcy rates following a shock to a customer industry. On an industry level, the shock to a customer industry is followed by a decrease in industry markups, disproportionate closure of firms, and cutbacks in inventories. Our analysis quantifies the elevated credit risk among small businesses and suggests a non-negligible 0.83% increase in expected losses on a diversified loan portfolio following a credit risk shock. This study provides banks and supervisors with greater clarity on timing and on the extent of elevated small business credit risk. It also allows them to assess the exposure of a bank portfolio to fluctuations in small business default rate. Such improved default prediction reduces credit rationing to the small business economy. |
| doi_str_mv | 10.1007/s11187-019-00308-9 |
| format | Article |
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| identifier | ISSN: 0921-898X |
| ispartof | Small business economics, 2021-06, Vol.57 (1), p.323-352 |
| issn | 0921-898X 1573-0913 |
| language | eng |
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| source | EBSCOhost Business Source Complete; Springer Nature - Complete Springer Journals |
| subjects | Bank portfolios Bankruptcy Business and Management Companies Credit risk Economic activity Entrepreneurship Industrial Organization Management Microeconomics Rationing Small business Spillover effect Supervisors |
| title | Spillovers to small business credit risk |
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