Template-Type: ReDIF-Paper 1.0
Author-Name: Pavel Chakraborty
Author-Name-First: Pavel
Author-Name-Last: Chakraborty
Title: Bank Ownership and Margins of Trade
Abstract: Does a bank's ownership matter for a firm's performance (to which it is connected)? Especially, in the event of a crisis? I study this question through the effect of 2008-09 crisis to provide evidence on a new channel which matters significantly for a firm's export performance - bank ownership. In particular, I find: (a) firms connected to private and/or foreign banks earn around 7.7- 39% less in terms of their export earnings during the crisis as compared to firms' having banking relationships with public-sector banks. This happened as the public-sector banks were differentially treated by the Central Bank of India during the crisis due to a clause in the Indian Banking Act of 1969; (b) effect is concentrated only on the intensive margin of trade; (c) drop in exports is driven by firms' client to big domestic-private banks and banks of US origin; (d) firms<br/>not connected to public-sector banks also laid-o¤ workers (both managers and non-managers), employed less capital and imported less raw materials. In addition, I also find that firms with lower average product of capital (than the median) received about 50% more loans from the public-sector sources, suggesting a significant reinforcement of inefficiency in the Indian economy<br/>due to misallocation of credit.
Creation-Date: 2019
File-URL: http://www.lancaster.ac.uk/media/lancaster-university/content-assets/documents/lums/economics/working-papers/LancasterWP2019_022.pdf
File-Format: application/pdf
Number: 282850537
Classification-JEL: F14, F41, G21, G28
Keywords: Bank Ownership, 2008-09 Financial Crisis, Public-sector Banks, Private and/or Foreign Banks, Exports
Handle: RePEc:lan:wpaper:282850537