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Bank asset transparency and credit supply

Subject

Accounting

Publishing details

Social Sciences Research Network

Authors / Editors

Balakrishnan K;Ertan A

Biographies

Publication Year

2018

Abstract

This paper examines the real effects of banks’ asset transparency. We employ the ECB Loan-level Reporting Initiative as a shock to banks’ asset disclosures. We find that, after the disclosure regulation, treatment banks raise more capital at cheaper rates and increase lending. Using novel survey data on small businesses, we also find that, in regimes with heightened bank disclosures, borrowers receive greater funding, conditional on their demand for credit. Further, companies whose relationship banks provide loan-level disclosures start to borrow and invest more, relative to the borrowers from the same country and industry in the same period. Collectively, our inferences suggest that asset disclosures alleviate the capital market frictions that banks face and allow them to supply more credit to the real economy

Keywords

Asset Disclosures; External Financing; Credit Supply; Bank Regulation; Real Effects; Small Businesses

Series

Social Sciences Research Network

Available on ECCH

No


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