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Bank Quality, Judicial Efficiency, and Loan Repayment Delays in Italy
Author(s) -
SCHIANTARELLI FABIO,
STACCHINI MASSIMILIANO,
STRAHAN PHILIP E.
Publication year - 2020
Publication title -
the journal of finance
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 18.151
H-Index - 299
eISSN - 1540-6261
pISSN - 0022-1082
DOI - 10.1111/jofi.12896
Subject(s) - enforcement , collateral , payment , business , loan , quarter (canadian coin) , quality (philosophy) , value (mathematics) , monetary economics , financial system , finance , economics , philosophy , archaeology , epistemology , machine learning , political science , computer science , law , history
Italian firms delay payment to banks weakened by past loan losses. Exploiting Credit Register data, we fully absorb borrower fundamentals with firm‐quarter effects. Identification therefore reflects firm choices to delay payment to some banks, depending on their health. This selective delay occurs more where legal enforcement of collateral recovery is slow. Poor enforcement encourages borrowers not to pay when the value of their bank relationship comes into doubt. Selective delays occur even by firms able to pay all lenders. Credit losses in Italy have thus been worsened by the combination of weak banks and weak legal enforcement.