Banking crises and the lending channel: Evidence from industrial firms in developing countries

This paper analyzes how banking crises affect firms' debt structure (availability and maturity). The results show that banking crises reduce both the availability and the maturity of firms' debt in developing countries. The negative effect of banking crises on firms' debt structure is, moreover, greater in small firms and in firms with less growth opportunities. However, the higher the bank market concentration, the lower the negative effect of banking crises on firms' debt availability and maturity. This finding suggests that during banking crises there are benefits from concentrated banking systems that foster investment in the creation of close lending relationships. The results also show a reduction in the negative impact of banking crises in countries with stricter restrictions on non-traditional banking activities and stronger official supervisory power.