NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH
loading...

Government Guarantees and Bank Vulnerability during a Crisis: Evidence from an Emerging Market

Viral V. Acharya, Nirupama Kulkarni

NBER Working Paper No. 26564
Issued in December 2019
NBER Program(s):Corporate Finance Program

We analyze the performance of Indian banks during 2007–09 relative to their vulnerability to a crisis measured using pre-crisis data, in order to study the impact of government guarantees on bank performance during a crisis. Using bank branch-level regulatory data, we exploit geographic variation in the exposure to state-owned banks to show that vulnerable private sector bank branches in districts with greater exposure to state-owned banks experienced deposit withdrawals and shortening of deposit maturity. In contrast, nearby vulnerable state-owned bank branches grew their deposit base and increased loan advances but with poorer ex-post performance of loans. Our evidence suggests that access to stronger government guarantees during aggregate crises allows even vulnerable state-owned banks to access and extend credit cheaply despite their under-performance, and this renders private sector banks especially vulnerable to crises.

You may purchase this paper on-line in .pdf format from SSRN.com ($5) for electronic delivery.

Access to NBER Papers

You are eligible for a free download if you are a subscriber, a corporate associate of the NBER, a journalist, an employee of the U.S. federal government with a ".GOV" domain name, or a resident of nearly any developing country or transition economy.

If you usually get free papers at work/university but do not at home, you can either connect to your work VPN or proxy (if any) or elect to have a link to the paper emailed to your work email address below. The email address must be connected to a subscribing college, university, or other subscribing institution. Gmail and other free email addresses will not have access.

E-mail:

Machine-readable bibliographic record - MARC, RIS, BibTeX

Document Object Identifier (DOI): 10.3386/w26564

 
Publications
Activities
Meetings
NBER Videos
Themes
Data
People
About

National Bureau of Economic Research, 1050 Massachusetts Ave., Cambridge, MA 02138; 617-868-3900; email: info@nber.org

Contact Us