Download This PaperHometown Lending
Journal of Financial and Quantitative Analysis, 56(8), 2894-2933
62 Pages Posted: 8 Oct 2020 Last revised: 4 Oct 2022
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: Suggested Citation