Danat’s post-1929 client selection does not explain the wage results.

Evidence

Column (7) addresses the concern that Danat potentially acquired a selection of risky borrowers during its expansion before 1929 (although we find no such evidence in terms of pre-crisis leverage). We use the dummy Danat connection (old) that equals one for the 19 firms already associated with Danat in 1923 (the earliest year before Danat’s expansion for which we have data on bank-firm connections). We further include Danat connection (new) that equals one if a company was connected to Danat in 1929 but not in 1923 (14 firms). The coefficients on both dummies are negative, significant, and slightly larger for old firms, relative to our baseline results in column (3). This means that Danat’s new clients, recruited in the 1920s, were no more fragile than old ones. In other words, column (7) provides further evidence that our results are not biased by Danat’s selection of firms after its merger in the early 1920s. — Sebastian Doerr et al., Financial Crises and Political…, 138