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Madrid, 10 September 2015.- The Spanish researchers Samuel Bentolila, Gabriel Jiménez and Sonia Ruano, and Marcel Jansen, of Dutch nationality, will today receive, from the hands of His Majesty The King, the VI Jaime Fernández de Araoz Prize on Corporate Finance, for their article entitled “When Credit Dries Up: Job Losses in the Great Recession”, which analyses the effects on employment of credits restrictions imposed on Spanish companies during the latest recession.

During the past economic recession, the number of loans granted by banks to non-financial companies in Spain notably fell. At the same time, Spain also registered high unemployment rates. The winning article has examined to what extent the first factor- related to business finance- is able to explain the second. Reduced credit has been a general occurrence in developed countries, which is why the reply to this question is of huge international interest.

Antonio Rodríguez-Pina, Chairman and CEO of Deutsche Bank España, chairing the Jury that awarded the Prize, said: “This article is highly relevant due to its rigorous methodology. It has been constructed on an exceptionally rich database, covering nearly one hundred and seventy thousand companies, including their financial statements, and analyses their relationship with credit entities operating in Spain at the time. There is no precedent in any other country with a similar analysis that uses such a large official database”.

“A rigorous analysis of relations held by Spanish companies with the banks, during the crisis, evidences how necessary corporate finance is for job creation and highlights the adequacy of counting on solid banks that apply responsible credit policies”, said Samuel Bentolila, one of the authors of the winning article.

Conclusions of the article
This empirical analysis, based on data taken from almost 170,000 companies between 2006 and 2010, reaches the following conclusions, amongst others:

• A quarter of the decrease in employment suffered by companies holding a debt with banks that were subsequently intervened was precisely due to this intervention.
• The same results are obtained if both types of bank are defined according to the level of exposure to the real estate sector, instead of considering whether or not they were subsequently intervened.
• Recourse to commercial credit did not alleviate the credit restrictions imposed on companies holding a debt with subsequently intervened entities.
• Unemployment rates due to exposure to subsequently intervened entities were much higher amongst companies with a worse credit track record, and nearly exclusively affected companies that held a debt with more than one bank.

Summary of the winning paper of the VI Edition Jaime Fernández de Araoz on Corporate Finance Award.

To read the complete paper please click here.