Abstract 

We provide empirical evidence on the effects of news about financial intermediaries’ net worth on the aggregate economy based on a high-frequency identification strategy. We measure «financial shocks» as the idiosyncratic changes in market value of large U.S. intermediaries’ net worth in a narrow window around their earnings announcements. We document sizable effects of financial shocks on the market value and borrowing costs of nonfinancial firms and macroeconomic outcomes. Evidence based on sign restrictions suggests that shocks primarily affecting credit supply drive these effects. In addition, the effects of financial shocks are larger for firms with high default risk and low liquidity, and when the aggregate net worth of intermediaries is low.