PhD defense: Financial Intermediation
On Wednesday 6 June Ove Rein Hetland will hold a trial lecture on a prescribed topic, and defend his thesis for the PhD degree at NHH.
01.06.2012 - Ed.
The thesis studies bank lending to small- and medium sized firms, which is a topic that has been given increased attention following the recent financial crisis.
One of the four thesis papers uses a survey of Norwegian firms that asks questions about how the firms were affected by the financial crisis of 2008-9, and combine this with information about the firms' financial- and bank accounts.
The primary finding is that investments of ex ante financially unconstrained firms are more affected by exogenous changes in credit availability than investments of financially constrained firms.
The results question the conventional wisdom that changes in financial constraints during a crisis are monotonically increasing in the level of financial constraints. Our results suggest that the correlation between credit availability and firm investments of the most financially constrained firms may not capture the full dynamics of how the credit channel influences the business cycle.
Another paper benefits from a detailed data set with all Norwegian firms' bank accounts and financial statements. Two questions are asked: (1) Do bank lending decisions to small and medium-sized firms provide information about these firms' future financial performance? (2) Does this predictability vary across different stages of the credit cycle?
The answer to both questions is yes. Competing 'outsider' banks lend to firms who subsequently perform worse than other borrowers, and the relationship is primarily present in the expansionary stages of the credit cycle.
This is consistent with theories where a firm's current bank lender has private information about its borrowers, while 'outsider' banks face a "winner's curse" when approached by new loan applicants.
The finding that this primarily occurs in credit cycle expansions is consistent with theories predicting that banks reduce screening of new borrowers in these periods, leading to lower average credit quality of borrowers when growth in aggregate credit is high.
Ove Rein Hetland (b. 1979) from Sandnes has been a PhD student at the Department of Finance and Management Science, NHH. He now works for Ernst & Young.
Prescribed topic for the trial lecture:
The financial crisis of 2008-2009: Was this time different?
Time of the trial lecture:
10:15 in Karl Borch's Auditorium, NHH
Title of the thesis:
Essays on Financial Intermediation
Time and place for the defense:
12:15 in Karl Borch's Auditorium, NHH
Supervising committee:
Associate Professor Jørgen Haug, NHH (principal supervisor)
Bent Vale, Norges Bank
Members of the evaluation committee:
Professor Eirik Gaard Kristiansen, NHH (chairperson)
Professor Timo Korkeamäki, Hanken School of Economis
Associate Professor Charlotte Östergaard, BI
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