Going the Extra Mile: Distant Lending and Credit Cycles

• 成果类型: Article
• 署名作者: Granja, Joao; Leuz, Christian; Rajan, Raghuram G.
• 署名单位: University of Chicago
• 刊物名称: JOURNAL OF FINANCE
• ISSN/ISSBN: 0022-1082
• DOI: 10.1111/jofi.13114
• 发表日期: 2022
• 页码: 1259-1324
• 关键词: Bank competition; monetary-policy; risk-taking; INFORMATION; incentives; finance; CRISIS; GROWTH; MARKET; booms

摘要

The average distance of U.S. banks from their small corporate borrowers increased before the global financial crisis, especially for banks in competitive counties. Small distant loans are harder to make, so loan quality deteriorated. Surprisingly, such lending intensified as the Fed raised interest rates from 2004. Why? We show that banks' responses to higher rates led bank deposits to shift into competitive counties. Short-horizon bank management recycled these inflows into risky loans to distant uncompetitive counties. Thus, rate hikes, competition, and managerial short-termism explain why inflows burned a hole in banks' pockets and, more generally, increased risky lending.