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Analysis of Stigma and Bank Credit Provision
Author(s) -
VOSSMEYER ANGELA
Publication year - 2019
Publication title -
journal of money, credit and banking
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.763
H-Index - 108
eISSN - 1538-4616
pISSN - 0022-2879
DOI - 10.1111/jmcb.12515
Subject(s) - stigma (botany) , business , intermediary , government (linguistics) , financial intermediary , finance , financial system , psychology , linguistics , philosophy , psychiatry
Abstract Bank rescue programs are designed to provide assistance to struggling financial intermediaries during financial crises. A complicating factor is that participating banks are often stigmatized by accepting assistance from the government. This paper investigates stigma in two ways: (i) it examines how stigma changes a bank's decision to seek assistance from the rescue program, and (ii) it analyzes how stigma affects a bank's ability to operate as a financial intermediary using a joint model for bank‐level application, approval, and lending decisions. The empirical results indicate that stigma hinders the objectives of the rescue program and slows the production of credit.