Journal of Financial and Quantitative Analysis Vol. 53 No. 4 2018

Corporate Resilience to Banking Crises: The Roles of Trust and Trade Credit

Ross Levine^1,2,3,4; Chen Lin^1,2,3,4; Wensi Xie^1,2,3,4

¹ Milken Institute · ² National Bureau of Economic Research · ³ University of Hong Kong · ⁴ University of California, Berkeley

Abstract

Are firms more resilient to systemic banking crises in economies with higher levels of social trust? Using firm-level data in 34 countries from 1990 through 2011, we find that liquidity-dependent firms in high-trust countries obtain more trade credit and suffer smaller drops in profits and employment during banking crises than similar firms in low-trust economies. The results are consistent with the view that when banking crises block the normal bank-lending channel, greater social trust facilitates access to informal finance, cushioning the effects of these crises on corporate profits and employment.

DOI

10.1017/s0022109018000224

Volume

53

Issue

4

Pages

1441-1477

Language

en

Sources

bibtex:phds-export.bib openalex crossref

Cite

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