Geographic Diversification and Banks' Funding Costs

• 成果类型: Article
• 署名作者: Levine, Ross; Lin, Chen; Xie, Wensi
• 署名单位: University of California System; University of California Berkeley; National Bureau of Economic Research; University of Hong Kong; Chinese University of Hong Kong
• 刊物名称: MANAGEMENT SCIENCE
• ISSN/ISSBN: 0025-1909
• DOI: 10.1287/mnsc.2020.3582
• 发表日期: 2021
• 页码: 2657-2678
• 关键词: Banking; banking regulation; funding cost; Financial stability

摘要

We assess the impact of geographic diversification on a bank's costs of interest-bearing liabilities. We employ a new identification strategy and discover that geographic expansion across U.S. states lowered funding costs. Consistent with expansion facilitating risk diversification, we find that (1) funding costs fall more when banks expand into states whose economies are less correlated with the banks' state and (2) geographic diversification reduces the costs of uninsured, but not insured, deposits. Consistent with expansion intensifying agency frictions, which puts upward pressures on funding costs, we discover that geographic diversification reduces the costs of interest-bearing liabilities more in better-monitored and better-run banks.