Score contribution per author:
α: calibrated so average coauthorship-adjusted count equals average raw count
We contend that industry heterogeneity in risk and financing has important implications for the passthrough of monetary policy to corporate loan spreads. Existing literature on the risk-taking channel shows that lax monetary policy induces bank risk-taking, and this implies that industries’ risk profiles might induce asymmetries in monetary policy passthrough. Using U.S. syndicated loans over 1984-2018, we examine industry heterogeneity in the potency of the risk-taking channel and assess how this heterogeneity affects firms’ performance. We find that a one percentage point decrease in the shadow rate increases loan cost by approximately 30 basis points in the mining-construction and manufacturing sectors. The effect is lower in the services and transportation-utilities industries, while it is insignificant in the trade and finance sectors. The identified differences in the potency of the risk-taking channel explain a significant part of the inferior firm performance of highly affected sectors in the year after loan origination.