Sovereign to Corporate Risk Spillovers

Patrick Augustin, Hamid Boustanifar, Johannes Breckenfelder, Jan Schnitzler

Research output: Contribution to JournalArticleAcademicpeer-review

Abstract

The first Greek bailout on April 11, 2010 triggered a significant reevaluation of sovereign credit risk across Europe. We exploit this event to examine the transmission of sovereign to corporate credit risk. A 10% increase in sovereign credit risk raises corporate credit risk on average by 1.1% after the bailout. The evidence is suggestive of risk spillovers from sovereign to corporate credit risk through a financial and a fiscal channel, as the effects are more pronounced for firms that are bank or government dependent. We find no support for indirect risk transmission through a deterioration of macroeconomic fundamentals.

Original languageEnglish
Pages (from-to)857-891
Number of pages35
JournalJournal of Money, Credit and Banking
Volume50
Issue number5
DOIs
Publication statusPublished - Aug 2018

Keywords

  • bailout
  • contagion
  • credit risk
  • F34
  • F36
  • G12
  • G15
  • Greece
  • H81
  • risk transmission

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