Economics, Econometrics and Finance
3 years ago

Public companies face higher loan rates during financial market instability.

SSRN Electronic Journal
The Impact of the IRB Approach on the Relationship Between the Cost of Credit for Public Companies and Financial Market Conditions
Raffaele Gallo

Paper Summary

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The study looked at how different banking rules affect loan rates for public and private companies in Italy from 2008 to 2018. They found that when financial markets are stable, public companies get cheaper loans from banks using a certain approach. But when markets get shaky, these companies face bigger loan rate increases compared to private firms, especially from less financially secure banks. On the other hand, banks using a different approach give similar loan rates to both public and private companies, regardless of market conditions.