Exporting Liquidity: Branch Banking and Financial Integration
University of Pennsylvania - The Wharton School
University of Virginia - Darden School of Business
Philip E. Strahan
Boston College - Department of Finance; National Bureau of Economic Research (NBER)
Darden Business School Working Paper No. 2252920
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.
Number of Pages in PDF File: 42
Keywords: Financial Integration, Branch Banking, Securitization
JEL Classification: G20, G21
Date posted: April 18, 2013 ; Last revised: August 17, 2013
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