Damaged collateral and firm-level finance: Evidence from Russia's war in Ukraine

Journal article

Solomiya Shpak, John S. Earle, Scott Gehlbach, Mariia Panga
Journal of Comparative Economics, vol. 51(4), 2023, pp. 1334-1343

DOI: 10.1016/j.jce.2023.06.010

View PDF

Cite

APA Click to copy
Shpak, S., Earle, J. S., Gehlbach, S., & Panga, M. (2023). Damaged collateral and firm-level finance: Evidence from Russia's war in Ukraine. Journal of Comparative Economics, 51(4), 1334–1343. https://doi.org/10.1016/j.jce.2023.06.010

Chicago/Turabian Click to copy
Shpak, Solomiya, John S. Earle, Scott Gehlbach, and Mariia Panga. “Damaged Collateral and Firm-Level Finance: Evidence from Russia's War in Ukraine.” Journal of Comparative Economics 51, no. 4 (2023): 1334–1343.

MLA Click to copy
Shpak, Solomiya, et al. “Damaged Collateral and Firm-Level Finance: Evidence from Russia's War in Ukraine.” Journal of Comparative Economics, vol. 51, no. 4, 2023, pp. 1334–43, doi:10.1016/j.jce.2023.06.010.

BibTeX Click to copy

@article{shpak2023a,
  title = {Damaged collateral and firm-level finance: Evidence from Russia's war in Ukraine},
  year = {2023},
  issue = {4},
  journal = {Journal of Comparative Economics},
  pages = {1334-1343},
  volume = {51},
  doi = {10.1016/j.jce.2023.06.010},
  author = {Shpak, Solomiya and Earle, John S. and Gehlbach, Scott and Panga, Mariia}
}

Abstract

How much has Russia’s war in Ukraine damaged the collateral of Ukrainian firms, and how much damage has that caused the Ukrainian financial system? We address this question using unusually rich high-frequency supervisory data of Ukrainian banks combined with a survey of banks on the location and condition of corporate borrowers’ collateral between February and November 2022. Exploiting plausibly exogenous variation in collateral value resulting from damage to collateral, we find that a 10-percent reduction in the collateral-loan ratio lowers the probability of getting any new loan by nearly eight percentage points; new lending falls by over two percentage points. Our results additionally imply that the same reduction in collateral value raises default rates and banks’ assessment of firms’ probability of default by approximately eight and four percentage points, respectively. The results imply that, in the absence of sufficient aid to repair the damage, Ukraine may experience reduced investment and lower economic growth in the future.