Publication of the Week: Ali Kabiri30 July 2018
This publication investigates the impact of bank distress on firms’ exports using matched firm – bank data for the UK. This is done through using a market-based measure of bank distress, the credit default risk (CDS) spreads, which best capture bank default risk, especially during crises.
This paper is the first to study banks’ CDS spreads and firms’ export performance during the recent crisis. Our unique database provides the critical firm-bank relationship information that allows us to directly test for the banking channel effects on the real economy, and to carefully account for various possible endogeneities and biases in estimation.
In addition, this publication also tests for a possible contagion of the effects of the Sovereign debt crisis from GIIPS economies to the UK. The findings suggest that bank distress negatively and significantly affected firms’ exports, and export intensities.