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Positive Bank-to-Bank Spillovers

Published online by Cambridge University Press:  11 July 2022

Shasta Shakya Open the ORCID record for Shasta Shakya [Opens in a new window]
Shasta Shakya*
Affiliation:
Arizona State University W. P. Carey School of Business
*
[email protected]
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Abstract

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This paper provides the first evidence of positive bank-to-bank spillovers. I show that geographic linkages between banks that engage in home lending in the same geographic region transmit positive shocks from one bank to another. I exploit shocks to the deposit base of banks located in counties experiencing shale oil booms and show that a nonshocked bank in a nonboom county expands lending more if its linkages have greater exposure to shale booms. Results show that the shock exposure of linkages has a positive impact on home prices of nonboom counties, and nonshocked banks located therein respond with increased lending.

Type
Research Article
Information
Journal of Financial and Quantitative Analysis , Volume 58 , Issue 5 , August 2023 , pp. 2228 - 2261
Creative Commons
Creative Common License - CCCreative Common License - BY
This is an Open Access article, distributed under the terms of the Creative Commons Attribution licence (http://creativecommons.org/licenses/by/4.0), which permits unrestricted re-use, distribution and reproduction, provided the original article is properly cited.
Copyright
© The Author(s), 2022. Published by Cambridge University Press on behalf of the Michael G. Foster School of Business, University of Washington

Footnotes

I thank the anonymous referee, Jarrad Harford (the editor), Laura Lindsey, and Robert Prilmeier for helpful discussions and comments on this paper. I also thank the participants and discussants (Noam Tanner, Ahmet Tuncez, and Efing Matthias) at the 2021 Financial Management Association annual meeting, the 2021 European Financial Management Association Annual Meeting, the 2021 Paris December Finance Meeting, and the finance seminar at University of Delaware.

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