Intermediary Ownership and the Transmission of Collateral Shocks

Abstract

Does the transmission of a shock to pledgeable assets depend on who intermediates it? We study the February 2023 Türkiye earthquakes, which destroyed real estate and other productive assets with sharp variation across districts. Comparing lenders serving the same firm, we find that state-owned banks extend larger loans at lower rates than private banks as local damage rises, with a sharp break at the earthquake. Loan-level collateral records show that state banks substitute toward non-real-estate collateral rather than lending against impaired real estate. The response is concentrated among SMEs and low-net-worth firms. Firms more reliant on state banks before the disaster receive more credit in harder-hit districts and have higher sales and payroll and lower exit; average Employment does not change measurably. The additional lending carries a modest short-run increase in non-performing loans and is not directed toward politically aligned districts. Intermediary ownership thus shapes how the destruction of collateral passes through to credit and real activity. Bio Mehmet Fatih Ulu is an Associate Professor at Koç University, where he specializes in international finance, corporat

Original announcement ↗