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Firm Volatility and Banks: Evidence from U.S. Banking Deregulation (Correa R., Suarez G. A.)

Bank-Borrower Relationships Regulation

Abstract This paper exploits the staggered timing of state-level banking deregulation in the United States during the 1980s to study the causal effect of banking integration on the volatility of non-financial corporations. We find that firm-level employment, production, sales, and cash flows are less volatile after interstate banking deregulation, particularly for firms that have limited access to external finance. This finding suggests that bank-dependent firms exploit wider access to finance after deregulation to smooth out idiosyncratic shocks. In fact, short-term credit becomes less pro-cyclical after out-of-state bank entry is permitted. Finally, lower volatility in real-side variables after deregulation translates into lower idiosyncratic risk in stock returns.
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Libref/ Correa R., Suarez G. A. (2009) “Firm Volatility and Banks: Evidence from U.S. Banking Deregulation”, Finance and Economics Discussion Paper № 2009-46, pp. 1-42
© Программирование — Александр Красильников, 2008
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