This paper investigates whether competition affects the degree of optimism in recommendations on Initial Public Offerings (IPOs) issued by affiliated sell-side analysts. Competition is measured by the number of unaffiliated analysts covering the IPO. Since the measure of competition is likely to be endogenous, it is instrumented using the number of analysts who cover stocks in the same industry as the IPO, one quarter before the one in which the recommendation is issued. The results show that affiliated analysts issue less optimistic recommendations when more unaffiliated analysts cover the IPO, suggesting that competition has a causal effect in mitigating the incentives of affiliated analysts to issue favorable investment recommendations. The paper also shows that recommendations issued by analysts affiliated with co-managers of the IPO are significantly less optimistic than those issued by analysts affiliated with the lead underwriter, and that competition affects only the degree of optimism of the latter.

We investigate whether the extent to which firms concentrate their borrowing from banks mitigates the credit contraction that followed the default of Lehman. Using micro data from a large sample of Italian firms, we show that firms borrowing from fewer banks and those with more concentrated borrowing suffer on average a smaller contraction in bank credit and have a lower probability of being credit-rationed. The results hold controlling for several firm-level characteristics and for the possible endogeneity of the measures of concentration of borrowing.

Using data from the Italian Credit Register we identify the adverse effect of the freeze of the securitization market on bank lending during the crisis of 2007–2008. Applying a differences-in-differences estimation to data on firms that borrow from multiple banks, we single out credit supply by including firm fixed effects. Our results show that the degree to which banks tightened credit supply to nonfinancial firms is positively related to the share of loans they securitized before the crisis. The tightening translated into lower credit growth, higher interest rates, lower probability of accepting loan applications and higher probability of relationship termination. Firms were unable to fully compensate the negative credit supply shock, which suggests that the securitization freeze played a role in reducing aggregate credit availability.

We quantify the real effects of the bank-lending channel exploiting the dramatic liquidity drought in interbank markets that followed the 2007 financial crisis as a source of variation in credit supply. Using a large sample of matched firm–bank data from Italy, we find had the interbank market not collapsed, investment expenditure would have been more than 20% higher and would have increased by around 30 cents per additional euro of available credit at the average firm. We also find that credit shocks affect the firm's value added, employment and input purchases, and propagate through firms' trade credit chains.

We quantify the real effects of the bank-lending channel exploiting the dramatic liquidity drought in interbank markets that followed the 2007 financial crisis as a source of variation in credit supply. Using a large sample of matched firm–bank data from Italy, we find had the interbank market not collapsed, investment expenditure would have been more than 20% higher and would have increased by around 30 cents per additional euro of available credit at the average firm. We also find that credit shocks affect the firm's value added, employment and input purchases, and propagate through firms' trade credit chains.

The policy response to COVID-19 includes the provision of credit guarantees to firms, a provision that may generate zombie lending. According to the recent literature, the relative performance of healthy firms deteriorates as the fraction of zombies increases. We argue that this literature faces a serious identification problem, because firm performance is often used to define zombies (sometimes implicitly). We show that, under general conditions for the distribution of firm performance, the correlation between healthy firm performance and zombies is a mechanical consequence of an increase in the fraction of zombies with no causal meaning.

We study the effects on corporate loan rates of an unexpected change in the Italian legislation that forbade interlocking directorates between banks. Exploiting multiple firm‐bank relationships to fully account for all unobserved heterogeneity, we find that prohibiting interlocks decreased the interest rates of previously interlocked banks by 14 basis points relative to other banks. The effect is stronger for high‐quality firms and for loans extended by interlocked banks with a large joint market share. Interest rates on loans from previously interlocked banks become more dispersed. Finally, firms borrowing more from previously interlocked banks expand investment, employment, and sales.

This paper studies the real effects of relationship lending on firm activity in Italy following Lehman Brothers’ default shock and Europe's sovereign debt crisis, two different crisis situations where in the latter, bank solvency was at the centre of the economic shock while being more peripheral in the former. We use a large data set that merges the comprehensive Italian Credit and Firm Registers. We find that following Lehman's default, banks offered more favourable continuation lending terms to firms with which they had stronger relationships. Such favourable conditions enabled firms to maintain higher levels of investment and employment. The insulation effects of tighter bank-firm relationships were still present during the European sovereign debt crisis, especially for firms tied to well capitalised banks.

We provide new evidence on how deposit funding affects bank lending. For identification, we exploit the 2011 reform of the investment income tax in Italy that induced households to substitute bank bonds with deposits. We find that banks with larger increases in deposits expand the supply of credit lines and long-term credit to low-risk firms. Additional evidence indicates that these results are consistent with theories emphasizing the demandable nature of the deposit contract rather than theories stressing the stability of deposit funding due to government guarantees. In this regard, we show that banks under stress face large runs on retail deposits, but not on retail bonds.

Monetary policy transmission may be impaired if banks rebalance their portfolios toward securities. We identify the bank lending and risk-taking channels of monetary policy by exploiting—Italy's unique—credit and security registers. In crisis times, with higher central bank liquidity, less capitalized banks react by increasing securities over credit supply, inducing worse firm-level real effects. However, they buy securities with lower yields and haircuts. Unlike in crisis times, in precrisis times, securities do not crowd out credit supply. The substitution from lending to securities in crisis times helps less capitalized banks repair their balance sheets and restart credit supply with a one-year lag.