We exploit staggered real estate transaction tax (RETT) hikes across German states to identify the effect of house price changes on mortgage credit supply. Based on approximately 33 million real estate online listings, we construct a quarterly hedonic house price index (HPI) between 2008:q1 and 2017:q4, which we instrument with state-specific RETT changes to isolate the effect on mortgage credit supply by all local German banks. First, a RETT hike by one percentage point reduces HPI by 1.2%. This effect is driven by listings in rural regions. Second, a 1% contraction of HPI induced by an increase in the RETT leads to a 1.4% decline in mortgage lending. This transmission of fiscal policy to mortgage credit supply is effective across almost the entire bank capitalization distribution.

This paper examines how supplier IPO events affect their key customers’ cost of debt. The evidence reveals that average loan spreads for customers increase by roughly 20% (23.7 basis points) following suppliers’ IPO events. This negative spillover effect is more pronounced when suppliers make significant relationship-specific investments (high switching cost), when suppliers face less concentrated customer bases, or when customers face more concentrated supplier bases. Our results show that customers receive less favourable trade terms and are forced to pay more for inputs after their suppliers go public, all of which increase customers’ operational costs, risk and subsequent borrowing costs. Furthermore, we document that customer loan contracts become significantly more restrictive after a supplier's IPO. Finally, we find that the observed negative spillover effect is also present in customers’ access to the public bond market.

We examine how banks manage carbon transition risk by selling loans given to polluting borrowers to less regulated shadow banks in securitization markets. Exploiting the election of Donald Trump as an exogenous shock that reduces carbon transition risk, we find that banks engage in regulatory arbitrage and use brown loan securitization to manage their exposure to carbon transition risk. Banks are more likely to securitize brown loans when carbon transition risk is high but keep these loans on their balance sheets when the risk is reduced. In addition, securitization enables banks to offer lower interest rates to polluting borrowers but does not affect the supply of green loans. Our findings are more pronounced among banks with low levels of capitalization, domestic banks, and banks that do not display green lending preferences. We discuss how securitization can weaken the effectiveness of bank climate policies.

DThe interactions between supply chains and sustainable finance have become a key area of research in financial markets, driven by growing global awareness of environmental and social challenges. Article 1 examines how lenders use sustainability clauses to monitor borrowers with negative environmental incidents and compares the use of this unique loan agreement design with conventional loan terms, financial and balance sheet-related clauses. We show that lenders are less inclined to include sustainability clauses in the loan agreement if a borrower has a history of negative environmental incidents. In contrast, lenders use sustainability clauses to attract institutional investors to participate in syndication rather than as monitoring tools for borrowers' environmental performance. Article 2 examines whether banks associated with biodiversity loss in the Amazon region experience a withdrawal of deposits when depositors become aware of their financing activities. I find empirical evidence that so-called ‘Amazon carbon banks’ experience slower growth in deposits once depositors learn about their financing activities. This effect is particularly pronounced when Amazon carbon banks have branches in counties that experience greater biodiversity loss compared to other branches. Article 3, how European companies that are heavily integrated into global supply chains (GSC) are affected by a supply chain disruption (Covid-19). We show that Covid-19 negatively affects the revenue growth of companies that are heavily dependent on GSC in their home country. Crucially, we uncover the role of banking relationships in mitigating the disruptive effects.

We investigate how global banks’ macroeconomic expectations for borrower countries influence their credit supply. Utilizing granular data on varying expectations among banks lending to the same firm at the same time, combined with an instrumental variable approach, we find that more optimistic GDP growth expectations for a borrower country are strongly linked to increased credit supply. Specifically, a one standard deviation increase in a lender’s GDP growth expectation for the borrower’s country corresponds to an increase of 8.46 percentage points in the loan share, equivalent to approximately 0.75 standard deviations of the loan share and $75.35 million in loan amount. In contrast, global banks’ short-term inflation expectations do not show a significant impact on their credit supply.

The establishment of the European Banking Union constitutes a major change in the regulatory framework of the banking system. Main parts are implemented via directives that show staggered transposition timing across EU member states. Based on the newly compiled Banking Union Directives Database, we assess how banks’ funding costs responded to the Capital Requirements Directive IV (CRD IV). Our findings show an upward trend in funding costs which is driven by an increase in cost of equity and partially offset by a decline in cost of debt. The diverging trends are most present in countries with an ex-ante lower regulatory capital stringency, which is in line with banks’ short-run adjustment needs but longer-run benefits from increased financial stability.

We study the corporate-loan pricing decisions of a major, systemic bank during the Greek financial crisis. A unique aspect of our data set is that we observe both the actual interest rate and the “break-even rate” (BE rate) of each loan, as computed by the bank’s own loan-pricing department (in effect, the loan’s marginal cost). We document that low-BE-rate (safer) borrowers are charged significant markups, whereas high-BE-rate (riskier) borrowers are charged smaller and even negative markups. We rationalize this de facto cross-subsidization through the lens of a dynamic model featuring depressed collateral values, impaired capital-market access, and limit pricing.

We investigate how a state's political corruption affects a resident firm's debt contracting and how a change in anti-corruption regulation alters the relation between corruption and loan contracting. Firms in more corrupt states are associated with significantly higher loan spreads and tighter loan covenants than firms in less corrupt states. Furthermore, the passage of the Dodd–Frank whistleblowing provision amplifies the conhcerns of banks about the detrimental impact of corruption due to the increased exposure of firms to whistleblowing threats. The detrimental impact of corruption is further amplified when a state has a higher level of whistleblowing involvement, when firms are located in more corrupt states or closer to the SEC office, and when the bank's state is less corrupt than the firm's state. In general, we document the externality of corruption in the debt financing of firms and the response of banks to changes in regulation.