The SAFE Visitors Program joint with the Finance Chair organize a brown bag seminar on
Loan Guarantees, Bank Lending and Credit Risk Reallocation
Prof. Andrew Ellul, PhD
Professor of Finance and Fred T. Greene Chair in Finance
Kelley School of Business, Indiana University
(the paper is co-authored with Carlo Altavilla, Marco Pagano, Andrea Polo and Thomas Vlassopoulos)
Venue: room HoF E.01
Abstract: How do government loan guarantees reallocate bank lending and credit risk? Using unique euro-area credit register data and exploiting the COVID-19 loan guarantee programs as a laboratory, we establish two main findings. First, guaranteed loans were mostly extended to small but creditworthy firms in sectors severely affected by the pandemic, borrowing from larger and stronger banks. Second, guaranteed loans partially substituted for pre-existing debt. Banks extending guaranteed loans reduced non-guaranteed credit by about 40% more than other banks lending to the same firm. Substitution was highest for riskier and smaller firms in more affected sectors, and for stronger banks.
Prof. Ellul will teach a 9-hour PhD-level mini-course on "Institutional Investors’ Activism"