Abstract

Do banks with different internalorganizations react differently to exogenous shocks? Are some organizationalstructures better at helping ‘good’ firms facing temporary difficulties, butwith high total factor productivity and better economic fundamentals andprospects? We answer this question by analyzing lending relationships of arepresentative sample of Italian non-financial firms in the 6-month periodafter Lehman’s failure. Controlling for credit demand with firm’s fixedeffects, we find that banks with internal organization that allow for a betteruse of soft information – because they have a smaller number of hierarchicallevels and are specialized in lending to smaller, and typically more opaquefirms – granted relatively more credit than other banks. Smaller firms alsoexperienced a stronger reduction in credit supply from those same banks thathave an internal organization that is less suitable to the transfer of softinformation. Finally, banks specialized in dealing with SME lending show abetter ability to help firms with higher productivity but under temporary financialdistress (i.e., higher short-term risk).