Bank-firm relationships and the performance of non-financial firms during the financial crisis 2008-09- microeconometric evidence from large-scale firm-level data

Working paper no 73, 2011

Authors Abildgren, Kim; Buchholst, Birgitte Vølund; Staghøj, Jonas
Subject Danish Economy; Financial markets and financial stability; Economic activity and employment; Financial stability; Business enterprises and households
Type Working paper
Year 2011
Published 19 September 2011
Utilising a unique data set with annual accounts from around 37,000 Danish non-financial firms spanning one and a half decade or so, we offer microeconometric evidence on bank-firm relationships and the performance of non-financial firms during the financial crisis 2008-09. Two major conclusions are drawn from the analysis. First, the probability of default during the financial crisis 2008-09 was significantly higher for firms with a “weak” bank than for comparable firms with a “sound” bank. Second, non-defaulting firms with a “weak” bank did not have a lower return on assets during the financial crisis 2008-09 than comparable firms with a “sound” bank. Taken together, these results may indicate the presence of heterogeneous effects of having a "weak" bank with significant negative effects on the economic performance for some firms but insignificant effects for the broad mass of firms.