Does bank failure affect client firms? Micro evidence from Estonia

Karin Joeveer

I explore the effect of a bank's failure on its client firms using the 1998 bankruptcy of a middle-sized Estonian bank.I compare the performance of firms receiving credit from the bankrupt bank to that of a randomly selected set of firms between 1996 and 2000.I find the client firms to be less likely to survive until the end of the sample frame even after controlling for their performance before the bank bankruptcy.

Zkoumam vliv padu banky na jeji klientske firmy na zaklade pripadu jedne zkrachovale estonske banky stredni velikosti v roce 1998. Porovnavam vykonnost firem ziskavajicich uver od zkrachovale banky s vykonnosti nahodne vybraneho vzorku firem mezi lety 1996 a 2000. Vysledky ukazuji, ze klienti teto banky maji nizsi pravddpodobnost preziti do konce pozorovaneho obdobi, a to i v pripade, ze zohlednuji jejich vykonnost pred pocatkem financnich problemu banky.

Keywords: Bank failure,client firm performance,firm bankruptcy

JEL classification: G14, G21, G3