Professor Lars Norden, manager of the CBFR, has published the paper "Labor and Finance: The Effect of Bank Relationships" on the The Journal of Financial and Quantitative Analysis (JFQA).

Abstract

In the research article “Labor and Finance: The Effect of Bank Relationships”, published in the Journal of Financial and Quantitative Analysis (JFQA) in November 2022, Dr. Patrick Behr (Università della Svizzera italiana, Switzerland), Professor Dr. Lars Norden (FGV EBAPE, Brazil; currently visiting researcher at Georgetown University and the International Monetary Fund in Washington DC) and Dr. Raquel de Freitas Oliveira (Central Bank of Brazil, Brazil) investigate whether firms’ number of credit relationships with financial institutions affects labor market outcomes. Using 5 million observations on matched credit and labor panel data from Brazil, they estimate IV regressions, employing exogenous variation in firm-lender relationships due to nationwide bank M&A activity. Firms with more relationships employ more workers and pay higher wage bills. Credit availability, cost of credit and financial institution heterogeneity are economic channels. The firm-level results translate into positive macroeconomic effects in municipalities and states. The evidence is novel and indicates positive effects of multiple relationships on labor market outcomes in an emerging economy.
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