Innovating Banks And Local Lending

69 Pages Posted: 17 Jul 2019 Last revised: 27 Jan 2021

See all articles by Denefa Bostandzic

Denefa Bostandzic

Heinrich Heine University Dusseldorf

Gregor N. F. Weiss

University of Leipzig - Faculty of Economics and Management Science

Date Written: January 25, 2021

Abstract

We study the effects of bank innovations on local deposit inflows and credit supply. To identify the causal effect of bank innovations on deposits and lending, we employ two distinct instrumental variables to explain banks’ patent approvals--the geographic heterogeneity of the human capital available at bank headquarters and the leniency of patent examiners. Banks that innovate experience deposit inflows, increase their local market power, and expand aggregate local lending, without impairing the quality of their loan portfolio. Finally, we show that innovation-induced credit supply shocks spur local economic growth and employment.

Keywords: Innovation, Financial Technology, Competition, Branch Banking, Credit Supply

JEL Classification: G20, G21

Suggested Citation

Bostandzic, Denefa and Weiss, Gregor N. F., Innovating Banks And Local Lending (January 25, 2021). Proceedings of Paris December 2020 Finance Meeting EUROFIDAI - ESSEC, Available at SSRN: https://ssrn.com/abstract=3421123 or http://dx.doi.org/10.2139/ssrn.3421123

Denefa Bostandzic

Heinrich Heine University Dusseldorf ( email )

Universitätsstrasse 1
Duesseldorf, DE NRW 40225
Germany

Gregor N. F. Weiss (Contact Author)

University of Leipzig - Faculty of Economics and Management Science ( email )

Grimmaische Str. 12
Leipzig, 04109
Germany
+49 341 97 33821 (Phone)
+49 341 97 33829 (Fax)

HOME PAGE: http://www.wifa.uni-leipzig.de/nfdl

Do you want regular updates from SSRN on Twitter?

Paper statistics

Downloads
219
Abstract Views
1,238
rank
190,208
PlumX Metrics