The Schumpeterian Role of Banks: Credit Reallocation and Capital Structure
| Item Type | Journal paper |
| Abstract | Capital reallocation across firms is a key source of productivity gains. This paper studies the ‘Schumpeterian role’ of banks: They liquidate loans to firms with poor prospects and reallocate the proceeds to more successful, expanding firms. To absorb liquidation losses without violating regulatory requirements, banks need to raise costly equity buffers ex ante. To economize on these buffers, they tend to reallocate too little credit and continue lending to weak firms. Tight capital standards, differentiated risk weights and low costs of bank equity facilitate reallocation. If agency costs of outside equity financing are not too high, their ability to reallocate credit renders banks more efficient than direct finance. |
| Authors | Keuschnigg, Christian & Kogler, Michael |
| Journal or Publication Title | European Economic Review |
| Language | English |
| Subjects | economics finance |
| HSG Classification | contribution to scientific community |
| Refereed | Yes |
| Date | January 2020 |
| Publisher | Elsevier |
| Number | 121 |
| ISSN | 0014-2921 |
| Publisher DOI | https://doi.org/10.1016/j.euroecorev.2019.103349 |
| Official URL | https://www.sciencedirect.com/science/article/pii/... |
| Depositing User | Michael Kogler |
| Date Deposited | 01 Mar 2020 16:08 |
| Last Modified | 20 Jul 2022 17:41 |
| URI: | https://www.alexandria.unisg.ch/publications/259516 |
DownloadFull text not available from this repository.CitationKeuschnigg, Christian & Kogler, Michael (2020) The Schumpeterian Role of Banks: Credit Reallocation and Capital Structure. European Economic Review, (121). ISSN 0014-2921 Statisticshttps://www.alexandria.unisg.ch/id/eprint/259516
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