Exporting Liquidity: Branch Banking and Financial Integration
Using exogenous deposit windfalls from oil and natural gas shale discoveries, we demonstrate that bank branch networks help integrate U.S. lending markets. We find that banks exposed to shale booms increase their mortgage lending in non-boom counties by 0.93% per 1% increase in deposits. This effect is present only in markets where banks have branches and is strongest for mortgages that are hard to securitize. 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.
We thank seminar participants at University of Amsterdam, ESSEC, University of Houston, INSEAD, University of Michigan, University of Virginia, University of Rotterdam, and Tilburg University. The views expressed herein are those of the authors and do not necessarily reflect the views of the National Bureau of Economic Research.
- [B]ranch networks allow lenders to mitigate contracting frictions, and play an important role in financial integration. Bank branch...
"Exporting Liquidity: Branch Banking and Financial Integration," Journal of Finance, Volume 71, Issue 3, June 2016, Pages: 1159–1184.