We revisit the spillover effects to non-financial, corporate borrowers from a systemic event in which a number of large, important banks simultaneously become imperiled. To shed light on this question, we build a novel, comprehensive dataset, covering both firms’ borrowing activities through bank loans, revolvers, corporate bonds, and commercial paper and the particular institutions to which they are connected. We demonstrate that while there are over one thousand financial institutions active in facilitating the borrowing activity of non-financial firms before the financial crisis, roughly 80% is facilitated by a group of large, central institutions. As many of these central institutions approach the edge of failure during the crisis, we uncover significant cross-sectional variability in the degree to which non-financial firms are affected, depending upon whether and how these firms rely on external debt financing. First, the one-third of firms that (largely) do not rely on external debt financing exhibit limited exposure to the systemic event. Second, for the remaining firms that do rely on external debt financing, the cross-sectional variation in their crisis exposure is mainly driven by measurable pre-crisis connections to the central financial institutions. Further, crisis exposures do not appear to be significantly lower for those firms that exhibit multiple bank connections or have access to the public debt market. The often-hypothesized means of diversifying funding risks appear to be limited in an episode where the central institutions are collectively impaired.
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