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Real effects of imperfect bank-firm matching

Author

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  • Luísa Farinha
  • Sotirios Kokas

Abstract

Using granular bank-firm level credit data, we show that the characteristics of bank-firm matches affect firms’ access to credit and real outcomes during crises. We identify a set of potential matches in pre-crisis years, and we use them to predict match formation in crisis times. We generate a measure of “imperfect matches" given by the difference between realized and predicted matches. In crisis times, imperfect matches deteriorate firm outcomes. The effects are economically important. A one standard deviation worsening in the index is associated with a drop in firms’ employment, tangible assets, and survival by 0.9%, 2.7%, and 4.2%, respectively.

Suggested Citation

  • Luísa Farinha & Sotirios Kokas, 2022. "Real effects of imperfect bank-firm matching," Working Papers w202210, Banco de Portugal, Economics and Research Department.
    • Handle: RePEc:ptu:wpaper:w202210
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    References listed on IDEAS

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    JEL classification:

    • E22 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Investment; Capital; Intangible Capital; Capacity
    • E51 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Money Supply; Credit; Money Multipliers
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G30 - Financial Economics - - Corporate Finance and Governance - - - General

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