Did the Euro Crisis Affect Non-Financial Firm Stock Prices Through a Financial or Trade Channel?
IMF Working Papers, September 1, 2011
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Bibliographic details
- Authors: Stijn Claessens, Hui Tong, Igor Esteban Zuccardi Huertas
- Published: September 1, 2011
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781463904951.001
Summary
- Paper analyzes through what channels the euro crisis has affected firm valuations globally.
- Examines stock price responses over the past year for 3045 non-financial firms in 16 countries to three key crisis events.
- Uses pre-crisis benchmarks to separate effects arising from changes in external financing and trade conditions.
- Examines how bank and trade linkages propagated effects across borders.
- Finds that policy measures announced impacted financially-constrained firms more, particularly in creditor countries with greater bank exposure to peripheral euro countries.
- Finds that trade linkages with peripheral countries also played a role, with euro exchange rate movements causing differential effects.
Methodology and Data
- Sample: 3045 non-financial firms in 16 countries.
- Event window: stock price responses over the past year to three key crisis events.
- Identification strategy: uses pre-crisis benchmarks to separate financial-channel effects (changes in external financing) from trade-channel effects (changes in trade conditions).
- Cross-border propagation: analyzes bank linkages (bank exposure to peripheral euro countries) and trade linkages (exposure to peripheral countries, and euro exchange rate movements).
Key Findings
- Policy measures announced had larger impacts on financially-constrained firms.
- Impacts were particularly pronounced in creditor countries with greater bank exposure to peripheral euro countries.
- Trade linkages with peripheral countries contributed to stock price responses.
- Euro exchange rate movements produced differential effects across firms with varying trade exposure.
Subjects and Keywords
- Subject: Asset prices, Banking, Exports, Financial crises, Financial institutions, Foreign banks, Foreign currency exposure, International trade, Money, Prices
- Keywords: Asset prices, bank exposure, debtor country, East Asia, Euro crisis, euro-zone firm, Europe, Exports, exposure to PEC, financial channel, firm Size, Foreign banks, Foreign currency exposure, Global, non-financial firms, stock price, trade channel, trade exposure, WP
IMF Working Paper — "Did the Euro Crisis Affect Non-Financial Firm Stock Prices Through a Financial or Trade Channel?" by Stijn Claessens, Hui Tong, and Igor Esteban Zuccardi Huertas; September 1, 2011.