Abstract
Do large credit risk shocks spillover to small businesses and affect their real economic activity? Using information on small business credit risk, we find that small businesses experience increased default and bankruptcy rates following a shock to a customer industry. On an industry level, the shock to a customer industry is followed by a decrease in industry markups, disproportionate closure of firms, and cutbacks in inventories. Our analysis quantifies the elevated credit risk among small businesses and suggests a 0. 83% increase in expected losses on a diversified loan portfolio following a credit risk shock.
Original language | English |
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Number of pages | 49 |
Journal | Small Business Economics |
Volume | 54 |
Issue number | 1 |
Early online date | 4 Jan 2020 |
DOIs | |
Publication status | Published - Jan 2020 |
Keywords
- Spillover effects
- Supply chain
- Small businesses
- Credit risk