30.04.2024; Kolloquium
Kolloquium: Firm Subsidies, Financial Intermediation, and Bank Stability
Joint work with Aleksandr Kazakov, Michael Koetter and Mirko Titze:
We use project-level information for the largest regional economic development program in German history to study whether government subsidies to firmsaffect thequantity and quality of bank lending. We match local banks tofirms that are subsidized underthe Improvement of Regional Economic Structures program (GRW), which is designed at the EU levelto identify lending and risk outcomes from 1998 to 2019. Banks with relationships to more subsidizedfirms exhibit higher lending volumes without any significant differences in bank stability. Subsidizedfirms, in turn, borrow more,indicating that banks facilitate regional economic development policies.