Exporting Liquidity: Branch Banking and Financial Integration

Erik Gilje, Elena Loutskina, Philip E. Strahan

NBER Working Paper No. 19403
Issued in September 2013
NBER Program(s):The Corporate Finance Program

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.

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Acknowledgments

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Document Object Identifier (DOI): 10.3386/w19403

Published: "Exporting Liquidity: Branch Banking and Financial Integration," Journal of Finance, Volume 71, Issue 3, June 2016, Pages: 1159–1184.

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