Date of Award

8-16-2024

Document Type

Open Access Dissertation

Department

Moore School of Business

First Advisor

Allen Berger

Abstract

This abstract synthesizes findings from four studies examining the liquidity creation, bank-borrower relationships, corporate capital structure, and managerial impact on firm performance, particularly within the context of banking and financial crises, including the COVID-19 pandemic.

The research first identifies the dual shocks of the pandemic—disease and policy-driven (government shutdowns)—on bank liquidity creation. I find that these shocks prompted banks to reallocate liquidity creation from assets (decreasing loans) to liabilities (increasing liquid deposits), which reduced profits and heightened risks.

In exploring bank-borrower relationships, the study highlights the role of banks in utilizing soft private information, such as the moral character of firm management, to bolster credit provision, especially to bank-dependent firms lacking solid, quality hard information. This relationship lending technology is crucial for firms that otherwise might not qualify for traditional credit avenues.

Further, a comprehensive analysis involving nearly 60,000 firms across 110 countries over 17 years investigates the effects of bank debt on corporate value. Results reveal that high-intensity use of bank debt (90% or more of total corporate debt) is strongly correlated with enhanced firm value. This correlation is more pronounced in credit-constrained firms, such as smaller companies and those in developing countries. The study differentiates the impacts of term loans and credit lines on short-term and long-term firm performance, respectively, suggesting nuanced capital structure strategies during financial crises like COVID-19.

Lastly, the role of managerial actions in firm performance is examined through the lens of exogenous shocks inducing managerial turnover. By focusing on the banking industry and utilizing detailed government-mandated data, findings underscore that managerial quality significantly boosts firm performance by improving asset turnover and product quality, which are reflected in both market valuations and accounting measures.

Together, these studies provide insightful implications for banking practices, debt management strategies, and managerial approaches in navigating through financial crises and enhancing firm performance. These insights are particularly relevant for policy formulation and understanding the intricate relationships within financial systems during turbulent times.

Rights

© 2024, Jiarui Guo

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