Abstract:Using firm-level data from 16 euro-area countries over 2008-2014, we investigate how the performance of bank-affiliated private equity-backed companies evolves after the European Banking Authority increased capital requirements for their parent banks. We find that portfolio companies connected to exposed banks reduce their level of investment and experience weaker asset growth, employment growth and profitability following the capital exercise. We further show that the effect is stronger for companies likely t… Show more
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