Browsing by Author "Ongena, Steven"
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- On-site inspecting zombie lendingPublication . Bonfim, Diana; Cerqueiro, Geraldo; Degryse, Hans; Ongena, Steven“Zombie lending” remains a widespread practice by banks around the world. In this paper, we exploit a series of large-scale on-site inspections made on the credit portfolios of several Portuguese banks to investigate how these inspections affect banks’ future lending decisions. We find that an inspected bank becomes 20% less likely to refinance zombie firms, immediately spurring their default. Overall, banks seemingly reduce zombie lending because the incentives to hold these loans disappear once they are forced to recognize losses.
- "Sorry, we're closed" bank branch closures, loan pricing, and information asymmetriesPublication . Bonfim, Diana; Nogueira, Gil; Ongena, StevenWe study local loan conditions when banks close branches. In places where branch closures do not take place, firms that purposely switch banks receive a sixty-three basis points (bps) discount. However, after the closure of nearby branches of their credit-granting banks, firms that locally and hurriedly transfer to other banks receive no such discount. Yet, the loan default rate for the latter (more expensive) transfer loans is on average a full percentage point lower than that for the former (cheaper) switching loans. This suggests that transfer firms are of "better"quality than switching firms. In sum, even if local markets remain competitive, when banks close branches, firms lose.