Decision-Making Delegation in Banks
67 Pages Posted: 23 Apr 2018 Last revised: 10 Oct 2022
Date Written: October 5, 2022
Using natural disasters as shocks to local economies, we document that a bank branch’s ability to set deposit rates locally has real effects. Following disasters, branches with rates set locally increase deposit rates more and experience higher deposit volumes in affected counties. Consistent with imperfect insurance from internal capital markets, banks with more branches setting rates locally relatively expand mortgage lending in affected counties. House prices recover faster in local areas where more branches’ rates are set locally.
Keywords: banks, organizational structure, branch banking
JEL Classification: G20, G21
Suggested Citation: Suggested Citation