How does financial market structure affect the impact of a banking crisis?

- The 2007 financial crisis hit industries more dependent on external finance harder.
- The negative impact was larger in countries with a more leveraged financial sector.
- The depth of financial markets did not affect the impact of the financial crisis.

We find a more negative impact of a financial crisis on growth of industrial sectors in developed countries that are more dependent on external finance, also when controlling for omitted variables by including country-time, industry-time and country-industry fixed effects. This differential effect is stronger in countries with a more leveraged financial sector, while it is unaffected by the depth of financial markets.