Systemic risk and the impact of financing sources on default risk

Zusammenfassung

This thesis studies the systemic risk within the financial sector, and the impact of financing sources on default risk in the corporate sector. The first essay models systemic risk using a common factor that accounts for market-wide shocks and a tail dependence factor that accounts for linkages among extreme stock returns. We show that disregarding the effect of the tail dependence factor leads to a downward bias in the measurement of systemic risk, especially during weak economic times. The second essay explores the mechanism through which a financial crisis affects the default risk of real-economy levered firms using the natural experiment of the 2007?2009 crisis. We find that firms strongly dependent on bank financing suffer higher increases in default risk, than otherwise similar firms with no dependence on bank financing. The third essay empirically examines the effect of rollover risk on default risk. We find that financing sources indeed drive this effect, and in particular our results strongly suggest that being bank dependent magnifies this effect