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Financial Frictions, Efficiency and Risk: Evidence from the Euro Area
journal contribution
posted on 2023-06-07, 20:34 authored by Georgios E Chortareas, Claudia Girardone, Alexia VentouriThis paper employs a simultaneous equations approach to investigate the dynamics between financial frictions, efficiency and risk for eurozones commercial banks. We consider two related channels through which financial frictions may arise: informational and market structure imperfections, and allow for a possible reverse causation from efficiency to banks asset quality. The findings validate the presence of both channels of financial frictions and are consistent with the efficiency-lending quality hypothesis that low efficiency signals poor asset quality loans. Finally, our findings suggest that policies aimed at constraining banks degree of openness may ultimately direct management choices towards riskier investments.
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Publication status
- Published
Journal
Journal of Business Finance and AccountingISSN
1468-5957External DOI
Issue
1&2Volume
38Page range
259-287Department affiliated with
- Business and Management Publications
Full text available
- No
Peer reviewed?
- Yes
Legacy Posted Date
2012-02-06Usage metrics
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