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How did the nationalization of UK operating banks as a result of the 2008 banking crisis impact their client firms' performance? We use unique firm-bank data and a propensity score matching technique and find that firms that borrowed from nationalized banks show a slight decrease in the growth of investment and innovation relative to firms that borrowed from non-nationalized banks. Interestingly, we find that firms that borrowed from nationalized banks slightly increase employment, short-term debt and cash holdings. Overall, these firms were able to maintain performance as a result of policy intervention. [ABSTRACT FROM AUTHOR]

This article investigates the impact of bank distress on firms' performance using unique data during the Great Recession for Ireland. The results show that bank distress, measured as banks' credit default swap spreads (CDS), has negatively and statistically significantly affected firms' investment expenditures. Interestingly, firms with access to alternative sources of external finance are not impacted by bank distress. The results are robust to accounting for external finance dependence, demand and trade sensitivities, which affect firm performance and the demand for credit. [ABSTRACT FROM AUTHOR]

Highlights • Bank distress has a statistically significant and economically meaningful effect on UK firm exports during the 2008–2015 period. • New combined measures of the Net Stable Funding Ratio and Credit Default Swap spreads used to measure bank distress. • The effect on exports exists across a large range of firm sizes. • Private firms are affected whilst Public firms are not, due to the ability of the latter group to use alternate sources of finance when their banks are in distress. • Contagion from GIIPS countries distress to UK firms can be seen via the UK financial system's links to the GIIPS economies. Abstract A growing literature aims to understand the structural change and cyclical factors that contributed to the Great Trade Collapse. This paper adds to the conversation by investigating the impact of bank distress on firms' exports using matched firm-bank data for the UK. We use two novel measures of bank distress: the Basel III net stable funding ratio, as well as the market-based bank credit default swap spreads, which best capture bank default risk, especially during crises. Our detailed database provides the crucial firm-bank relationship information that allows us to directly test for the banking channel effect on the real economy, and to carefully account for various endogeneities and biases in estimation. We also test for the possible contagion of the Sovereign Debt Crisis from the GIIPS economies to the UK. We find that the severe bank distress generated by the recent crises immediately, negatively and significantly affects UK firms' exports, independent of demand shocks. Not all firms were impacted equally: private firms and firms in industries more dependent on external finance were impacted the most, while publicly owned firms were less affected by their bank's distress. [ABSTRACT FROM AUTHOR]

The modern literature on the US banking crisis in 1931 overlooks the key role played by ‘liquidity black holes’ and under-pricing in the corporate and government bond markets resulting from the banking system's fire sale of assets. This process weakened the bank lending channel in a continuous feedback loop which was eventually checked by ‘money creation’ by the Federal Reserve. This note investigates the work of Evans Clark (1933 ) who highlighted the process of fire sales and mispricing of assets due to non-fundamental causes. [ABSTRACT FROM AUTHOR]