The Impact of Objectives on Firm Decisions: Bank and Credit Union Lending in the Great Recession

57 Pages Posted: 8 Nov 2018 Last revised: 18 Dec 2018

See all articles by Anna Cororaton

Anna Cororaton

United States Energy Information Administration

Date Written: November 8, 2018

Abstract

Credit unions lent significantly more than profit-maximizing banks during the Great Recession. Loan growth rates were higher for the $1.3 trillion industry by as much as 10 percentage points at the peak of the crisis. Using a newly constructed database containing balance sheet information and loan-level activity, I compare institutions that faced identical borrowers in the same local credit markets and control for crises exposures to show that the effect is supply-driven. Further, the lending difference was sustained by 15-20 percent lower profit margins. Loan pricing, informational advantages, taxes, or the regulatory environment do not explain the results. Rather, member-oriented non-profit objectives precluded the slow economic recovery of credit unions after the financial crisis.

Keywords: Banking, Financial institutions, Firm objectives, Household finance, Great Recession, Credit supply

JEL Classification: D22, G01, G21, L21, L33, P13

Suggested Citation

Cororaton, Anna, The Impact of Objectives on Firm Decisions: Bank and Credit Union Lending in the Great Recession (November 8, 2018). SMU Cox School of Business Research Paper No. 18-36, Available at SSRN: https://ssrn.com/abstract=3281376 or http://dx.doi.org/10.2139/ssrn.3281376

Anna Cororaton (Contact Author)

United States Energy Information Administration ( email )

1000 Independence Ave., SW
Washington, DC 20585
United States

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
78
Abstract Views
653
Rank
515,976
PlumX Metrics