Knut Wicksell Working Paper Series, Knut Wicksell Centre for Financial Studies, Lund University
Does the financial crisis affect distressed or constrained firms more heavily?
Abstract: We develop a framework to investigate the impact of the
financial crisis starting in 2007 and employ an extended GARCH model to
test for spillover and contagion effects originating from the financial
sector. We find that the financial crisis affected financially distressed
firms more heavily than undistressed firms and that financial constraints
did not play an equally crucial role during the crisis. Overall, the
analysis shows that the financial sector affected the returns of
nonfinancial firms during the crisis. We find little evidence that the
turbulence in the financial sector expressed in terms of volatility fully
encroached upon nonfinancial firms.
Keywords: GARCH; Spillover; Contagion; Financial Distress; Financial Constraints; Financial Crisis; (follow links to similar papers)
JEL-Codes: G01; (follow links to similar papers)
28 pages, April 1, 2015
Full text versions of the paper: http://www.lusem.lu.se/media/kwc/working-papers/2015/kwc-wp-2015-4.pdf
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