Hometown Lending

Journal of Financial and Quantitative Analysis, Forthcoming

62 Pages Posted: 8 Oct 2020 Last revised: 20 May 2021

See all articles by Ivan Lim

Ivan Lim

Durham University

Duc Duy Nguyen

Durham University

Date Written: July 22, 2020

Abstract

Banks open more branches and make more lending near their Chief Executive Officers’ (CEOs) childhood hometowns. The effects are stronger among informationally opaque borrowers and among CEOs who spend more time in their childhood hometowns. Furthermore, loans originated near CEOs’ hometowns contain more soft information and have lower ex-post default rates, implying that hometown loans are more informed. Hometown lending does not affect aggregate bank outcomes, suggesting that credit is being reallocated from regions located farther away to regions proximate to bank CEOs’ hometowns.

Keywords: Home Bias, CEOs, Banks, Lending, Information

JEL Classification: G2, G21, G3

Suggested Citation

Lim, Ivan and Nguyen, Duc Duy, Hometown Lending (July 22, 2020). Journal of Financial and Quantitative Analysis, Forthcoming, Available at SSRN: https://ssrn.com/abstract=3658656 or http://dx.doi.org/10.2139/ssrn.3658656

Ivan Lim

Durham University ( email )

United Kingdom

Duc Duy Nguyen (Contact Author)

Durham University ( email )

Mill Hill Lane
Durham, Durham DH1 3HP
United Kingdom

HOME PAGE: http://sites.google.com/site/louisnguyen6589/home

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