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Does the financial crisis affect distressed or constrained firms more heavily?

Author

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  • Alfranseder, Emanuel

    (Knut Wicksell Centre for Financial Studies, Lund University)

Abstract

We develop a framework to investigate the impact of the financial crisis starting in 2007 and employ an extended GARCH model to test for spillover and contagion effects originating from the financial sector. We find that the financial crisis affected financially distressed firms more heavily than undistressed firms and that financial constraints did not play an equally crucial role during the crisis. Overall, the analysis shows that the financial sector affected the returns of nonfinancial firms during the crisis. We find little evidence that the turbulence in the financial sector expressed in terms of volatility fully encroached upon nonfinancial firms.

Suggested Citation

  • Alfranseder, Emanuel, 2015. "Does the financial crisis affect distressed or constrained firms more heavily?," Knut Wicksell Working Paper Series 2015/4, Lund University, Knut Wicksell Centre for Financial Studies.
    • Handle: RePEc:hhs:luwick:2015_004
    Note: Full text versions of the paper: http://www.lusem.lu.se/media/kwc/working-papers/2015/kwc-wp-2015-4.pdf
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    GARCH; Spillover; Contagion; Financial Distress; Financial Constraints; Financial Crisis;
    All these keywords.

    JEL classification:

    • G01 - Financial Economics - - General - - - Financial Crises

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