Discussion of Presbitero, Udell, and Zazzaro

The paper by Presbitero, Udell and Zazzaro (henceforth, PUZ) aims to investigate whether the financial crisis that in Italy really “hit” after Lehman Brothers in September 2008 actually led to a credit crunch there and which types of firms suffered most. PUZ start from the quarterly editions of a monthly survey of about 3,800 Italian manufacturing firms (by ISAE, now ISTAT) to analyze credit access by 3,623 firms between 2008:Q1 to 2009:Q3, i.e., 23,140 firm-quarter observations of which 12,734 came after Lehman. PUZ find suggestive evidence that there was a credit crunch in Italy post-Lehman, that firms in provinces with bank branches located further from their bank’s headquarter (i.e., with banks that are more functionally distant) suffered relatively more, and that in those provinces especially high-quality firms were affected. These findings are consistent with a home bias but not with a flight-to-quality interpretation. This nice paper by PUZ is truly thought-provoking as the home bias in banking that is documented is occurring within one country. But before pointing out a possible broader avenue for further investigation, I want to discuss a few limitations of this study (most of which the authors are also aware of and candidly highlight) and in this way also indicate more immediate directions for follow-up research