Capital Mobility and Regulation Frictions: Evidence from U.S. Lottery Winners

55 Pages Posted: 2 Dec 2015 Last revised: 24 Dec 2018

See all articles by Carlos Parra

Carlos Parra

Pontifical Catholic University of Chile - School of Business

Date Written: December 20, 2018

Abstract

I empirically analyze how banks reallocate capital across lending markets following funding shocks. I exploit a new source of quasi-experimental variation in bank funding from lottery winners. Exposure to jackpot shocks leads to a significant increase in both deposits and lending at the bank level. Funds are transmitted across markets, but allocations are five times greater in the state in which the shock occurs. Features of banking regulation (Section 109) negatively affect fund mobility and loan performance. These results suggest that state boundaries matter for capital mobility in part because of regulatory distortions.

Keywords: Financial Integration, Banking Regulation, Credit Supply, Policy Distortions, Mega Millions, Powerball

JEL Classification: G21, G28, G32

Suggested Citation

Parra, Carlos, Capital Mobility and Regulation Frictions: Evidence from U.S. Lottery Winners (December 20, 2018). Available at SSRN: https://ssrn.com/abstract=2696283 or http://dx.doi.org/10.2139/ssrn.2696283

Carlos Parra (Contact Author)

Pontifical Catholic University of Chile - School of Business ( email )

Vicuna Mackenna 4860
Santiago
Chile

HOME PAGE: http://www.carlosrparra.com/

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