Template-Type: ReDIF-Paper 1.0
Series: Tinbergen Institute Discussion Papers
Creation-Date: 2022-11-13
Number: 22-078/IV
Author-Name: Aleksandr Kazakov
Author-Workplace-Name: Halle Institute for Economic Research
Author-Name: Michael Koetter
Author-Workplace-Name: University of Magdeburg
Author-Name: Mirko Titze
Author-Workplace-Name: University of Halle
Author-Name: Lena Tonzer
Author-Workplace-Name: Vrije Universiteit Amsterdam
Title: Firm subsidies, financial intermediation, and bank stability
Abstract: We use project-level information for the largest regional economic development program in German history to study whether government subsidies to firms affect quantity
and quality of bank lending. We combine recipient firms under the Improvement of Regional Economic Structures program (GRW) with their local banks during 1998-2019.
The modalities of GRW subsidies to firms are determined at the EU level. Therefore, we use it to identify bank outcomes. Banks with relationships to more subsidized
firms exhibit higher lending volumes without any significant differences in bank stability. Subsidized firms, in turn, borrow more indicating that banks facilitate regional
economic development policies
Classification-JEL: G21, G28, H25
Keywords: Government subsidies, Financial intermediation, Bank stability
File-URL: https://papers.tinbergen.nl/22078.pdf
File-Format: application/pdf
File-Size: 6.436.035 bytes
Handle: RePEc:tin:wpaper:20220078