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Financial Crises, Financial Dependence, and Industry Growth (2002)
| Citations: | 7 - 0 self |
BibTeX
@MISC{Laeven02financialcrises,,
author = {Luc Laeven and Daniela Klingebiel and Randy Kroszner and Inessa Love For Comment},
title = {Financial Crises, Financial Dependence, and Industry Growth},
year = {2002}
}
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Abstract
This paper investigates the linkage between financial crises and industry growth. We analyze data from 19 developed and developing countries that have experienced financial crises during the last 30 years to investigate how financial crises affect sectors dependent on external sources of finance. Specifically, we examine whether the impact of a financial crisis on externally dependent sectors varies with the depth of the financial system. We find that sectors highly dependent on external finance tend to experience a greater contraction of value added during a crisis in deeper financial systems than in countries with shallower financial systems. We hypothesize that the deepening of the financial system allows sectors dependent on external finance to obtain relatively more external funding in normal periods, so a crisis in such countries would have a disproportionately negative effect on externally dependent sectors. In contrast, since externally dependent firms tend to obtain relatively less external financing in shallower financial systems (and hence have relatively lower growth rates in such countries during normal times), a crisis in such countries has less of a disproportionately negative effect on the growth of externally dependent sectors.
Keyphrases
financial crisis industry growth financial dependence financial system negative effect dependent sector le external financing deeper financial system external source normal time normal period dependent sector varies external funding shallower financial system dependent firm external finance sector dependent growth rate external finance tend
