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Bank asset transparency and credit supply

  • Karthik Balakrishnan
  • Aytekin ErtanEmail author
Article

Abstract

We employ the European Central Bank’s 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 document that, in regimes with heightened bank disclosures, borrowers receive greater funding, conditional on their demand for credit. Furthermore, companies whose relationship banks provide asset disclosures start to borrow and invest more relative to firms from the same country and industry. 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 Credit supply Bank regulation Real effects SMEs 

JEL classifications

G21 G28 G32 M41 M48 

Notes

Acknowledgements

We thank Paul Fischer (Editor), an anonymous reviewer, Brian Akins, Allen Berger, Darren Bernard, Gauri Bhat (discussant), Mark Bradshaw, Bob DeYoung, Yiwei Dou, Carlo Gallimberti, Chris Higson, Amy Hutton, Anya Kleymenova, Art Kraft, Alvis Lo, Maria Loumioti, Suheyla Ozyildirim, Darren Roulstone, Sugata Roychowdhury, Stephen Ryan, Catherine Schrand, Lakshmanan Shivakumar, Bobby Stoumbos, Irem Tuna, Alfred Wagenhofer, David Windisch, Regina Wittenberg-Moerman (discussant), Fatih Yilmaz, seminar participants at Boston College, Bilkent University, Cass Business School, the Central Bank of the Republic of Turkey, London Business School, the University of Amsterdam, the University of Graz, the University of Oxford, and conference participants at the 2016 Carnegie Mellon University Accounting Symposium, 2017 Chicago Financial Institutions Conference, and 2018 FARS Midyear Meetings at Austin for helpful comments and suggestions. Financial support from the LBS RAMD Fund is gratefully acknowledged. Ertan thanks the European DataWarehouse for the loan-level data and the European Central Bank for the data on the EC/ECB Survey on the Access to Finance of Enterprises. The views expressed in this study are those of the authors and do not reflect those of the European Central Bank, European Commission, European DataWarehouse, or any other organization.

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Copyright information

© Springer Science+Business Media, LLC, part of Springer Nature 2019

Authors and Affiliations

  1. 1.London Business SchoolLondonUK

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