Abstract

http://ssrn.com/abstract=1183802
 
 

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Internal Capital Markets and Corporate Politics in a Banking Group


Martijn Cremers


University of Notre Dame

Rocco Huang


Michigan State University - Department of Finance; Wharton Financial Institutions Center

Zacharias Sautner


Frankfurt School of Finance & Management gemeinnützige GmbH

September 28, 2010

Review of Financial Studies, 24, 2011, 358-401
European Banking Center Discussion Paper No. 2009-15S
Yale ICF Working Paper No. 08-19
AFA 2010 Atlanta Meetings Paper
CentER Discussion Paper Series No. 2009-47S

Abstract:     
We analyze proprietary internal capital allocation data from a large retail-banking group consisting of member banks and a headquarters organization. Capital allocations from headquarters compensate for deposit shortfalls at the bank level, suggesting that headquarters offers deposit smoothing to its member banks. We then analyze how the distribution of influence within the group relates to capital allocations and lending behavior. More influential banks are allocated more funds from headquarters and their loan growth is less sensitive to their deposit base. The effects of influence are stronger if banks have greater demand for deposit smoothing.

Number of Pages in PDF File: 54

Keywords: internal capital markets, capital markets, retail banking, corporate politics

JEL Classification: G21, G31, G32, G34, M40, M46

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Date posted: July 31, 2008 ; Last revised: August 2, 2012

Suggested Citation

Cremers, Martijn and Huang, Rocco and Sautner, Zacharias, Internal Capital Markets and Corporate Politics in a Banking Group (September 28, 2010). Yale ICF Working Paper No. 08-19; Review of Financial Studies, 24, 2011, 358-401 ; European Banking Center Discussion Paper No. 2009-15S; Yale ICF Working Paper No. 08-19; AFA 2010 Atlanta Meetings Paper; CentER Discussion Paper Series No. 2009-47S. Available at SSRN: http://ssrn.com/abstract=1183802 or http://dx.doi.org/10.2139/ssrn.1183802

Contact Information

K. J. Martijn Cremers (Contact Author)
University of Notre Dame ( email )
P.O. Box 399
Notre Dame, IN 46556-0399
United States
Rocco Huang
Michigan State University - Department of Finance ( email )
315 Eppley Center
East Lansing, MI 48824-1122
United States
HOME PAGE: http://www.roccohuang.com
Wharton Financial Institutions Center
2306 Steinberg Hall-Dietrich Hall
3620 Locust Walk
Philadelphia, PA 19104
United States
Zacharias Sautner
Frankfurt School of Finance & Management gemeinnützige GmbH ( email )
Sonnemannstraße 9-11
Frankfurt am Main, 60314
Germany
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