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Bank credit rating changes, capital structure adjustments and lending

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  • UserProfessor Claudia Girardone, Essex Business School, University of Essex
  • ClockWednesday 07 February 2018, 16:00-17:00
  • HouseMill Lane Lecture Room 1.

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This paper examines the causal effect of bank credit rating changes on bank capital structure decisions. Banks adjust their capital structure following a credit rating downgrade. Adjustments involve: leverage, rating sensitive liabilities and lending. Rating upgrades do not affect capital structure activities suggesting that banks target minimum rating levels. In our study, we also exploit the asymmetric impact of downgrades of banks based in Greece, Ireland, Italy, Spain and Portugal during the EU sovereign debt crisis. This asymmetric effect leads to greater capital adjustments, reductions in long-term funding and lending of banks from those countries relative to other banks. Our results are consistent with the expectation of discrete cost (benefits) associated with rating changes.

Claudia Girardone is Professor of Banking and Finance at Essex Business School of the University of Essex. She is also Director of the Essex Finance Centre (EFiC) and the School’s Director of Research. Professor Girardone has published over 50 articles on various aspects of banking and finance in books and peer-reviewed international journals. She is a co-author of the textbook Introduction to Banking (FT Pearson Education, 2015). She is currently on the editorial board of several journals including the Journal of Financial Economic Policy and The European Journal of Finance. Her current research areas are on banking sector performance and stability, bank corporate governance, the industrial structure of banking and access to finance.

This talk is part of the Land Economy Departmental Seminar Series series.

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