Bank supply shocks and the substitution between bank and nonbank debt

We identify the effect of the bank credit shock of the 2007-2009 crisis on corporate debt structure by analyzing the substitution of bank debt with nonbank debt (both private and public). Using firm-level data in 34 countries, we find that nonbank credit partially substitutes bank loans in bank-dependent firms after the onset of the global financial crisis. However, there are differences across countries depending on creditor rights and information sharing among creditors. Strong creditor protection in bankruptcy increases the reduction in bank debt whereas a collateral regime favors substitution with private nonbank debt. Information sharing favors substitution with public debt. (C) 2017 Elsevier B.V. All rights reserved.