This paper studies how access to bank lending differed between family and non-family firms in the 2007-2009 financial crisis. The theoretical prediction is that family block-holders' incentive structure results in lower agency conflict in the borrower-lender relationship. Using highly detailed data on bank-firm relations, we exploit the reduction in bank lending in Italy following the crisis in October 2008. We find statistically and economically significant evidence that the contraction in credit for family firms was smaller than that for non-family firms. Results are robust to ex-ante observable differences between the two types of firms and to time-varying bank fixed effects. We further show that the difference in the amount of credit granted to family and non-family firms is related to an increased role for soft information in Italian banks' operations, following the Lehman Brothers' failure. Finally, by identifying a match between those banks and family firms, we can control for time-varying unobserved heterogeneity among the firms and validate the hypothesis that our results are supply driven.
We employ a representative sample of 80,972 Italian firms to forecast the drop in profits and the equity shortfall triggered by the COVID-19 lockdown. A 3-month lockdown generates an aggregate yearly drop in profits of about 10% of GDP, and 17% of sample firms, which employ 8.8% of the sample’s employees, become financially distressed. Distress is more frequent for small and medium-sized enterprises, for firms with high pre-COVID-19 leverage, and for firms belonging to the Manufacturing and Wholesale Trading sectors. Listed companies are less likely to enter distress, whereas the correlation between distress rates and family firm ownership is unclear.
Using data from a new survey of 3,000 Italian households collected at the end of October 2020, we study the effect of fear of COVID-19 contagion and income risk on consumption. The survey elicits individual-level indicators of fear of contagion, distinguishing between worries while working, shopping, traveling, eating out and meeting relatives or friends, and indicators of changes in spending behavior after the pandemics. The probabilities of consumption drops and increased saving are positively associated to fear of contagion, particularly while shopping, traveling and eating out. Income uncertainty, measured by the probability of job loss, also contributes to explain the increase in saving and the drop in consumption. Our findings suggest that fear of contagion and income uncertainty limits the effectiveness of policies aimed at stimulating consumption during the pandemic.
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