TY  - RPRT
        AU  - Balduzzi, Pierluigi
AU  - Brancati, Emanuele
AU  - Schiantarelli, Fabio
        TI  - Financial Markets, Banks' Cost of Funding, and Firms' Decisions: Lessons from Two Crises
        PY  - 2013/Dec/
        PB  - Institute of Labor Economics (IZA)
        CY  - Bonn
        T2  - IZA Discussion Paper
        IS  - 7872
        UR  - https://www.iza.org/publications/dp7872
        AB  - We test whether financial fluctuations affect firms' decisions, through their impact on banks' cost of funding. We exploit two shocks to Italian bank CDS spreads and equity valuations: the 2007-2009 financial crisis and the 2010-2012 sovereign debt crisis. Using newly available data linking over 3,000, mostly privately-held, non-financial firms to their bank(s), we find that increases in Italian banks' CDS spreads and decreases in their equity valuations lead younger and smaller firms to cut investment, employment, and borrowing. We conclude that financial market fluctuations affect even private firms' real decisions by affecting the costs of funds of their banks.
        KW  - volatility
KW  - credit-default swaps
KW  - banks
KW  - financial market shocks
KW  - investment
KW  - employment
KW  - lending
        ER  -