Exporting Liquidity: Branch Banking and Financial Integration

Erik P. Gilje · Elena Loutskina · Philip E. Strahan

353 citations0/0 files storedThe Journal of Finance

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Banking stability, regulation, efficiency Monetary Policy and Economic Impact Housing Market and Economics

Abstract

ABSTRACT Using exogenous liquidity windfalls from oil and natural gas shale discoveries, we demonstrate that bank branch networks help integrate U.S. lending markets. Banks exposed to shale booms enjoy liquidity inflows, which increase their capacity to originate and hold new loans. Exposed banks increase mortgage lending in nonboom counties, but only where they have branches and only for hard‐to‐securitize mortgages. Our findings suggest that contracting frictions limit the ability of arm's length finance to integrate credit markets fully. Branch networks continue to play an important role in financial integration, despite the development of securitization markets.

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References

1997Financial Intermediation, Loanable Funds, and The Real Sector 2010Big Bad Banks? The Winners and Losers from Bank Deregulation in the United States 1994Monetary Policy, Business Cycles, and the Behavior of Small Manufacturing Firms 2000What Do a Million Observations on Banks Say About the Transmission of Monetary Policy?2002Does Distance Still Matter? The Information Revolution in Small Business Lending 2009The Consequences of Mortgage Credit Expansion: Evidence from the U.S. Mortgage Default Crisis *2005Does function follow organizational form? Evidence from the lending practices of large and small banks 1999Agency Cost of Free Cash Flow, Corporate Finance, and Takeovers

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