Bank connections, corporate investment and crisis

Susanne Espenlaub, Arif Khurshed, Thitima Sitthipongpanich

Research output: Contribution to journalArticlepeer-review

20 Citations (Scopus)


Against the backdrop of a severe financial crisis and extensive restructuring of the financial sector, we investigate the evolution and determinants of connections between firms and banks, and the impact of bank connections on corporate investment. Our study examines Thai non-financial companies during 1995-2000, a period straddling the East Asian Financial Crisis of 1997-1998. Before the crisis, bank-connections are common and associated with significantly lower sensitivity of corporate investment to internal cash flow. After the crisis, and following substantial changes in bank ownership and governance due to financial-sector reforms and restructuring, far fewer firms are bank-connected and connections no longer affect investment-cash flow sensitivity.

Original languageEnglish
Pages (from-to)1336-1353
Number of pages18
JournalJournal of Banking and Finance
Issue number5
Early online date13 Dec 2011
Publication statusPublished - May 2012
Externally publishedYes


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