Journal of Financial Intermediation最新文献

Using unique administrative data on firm-to-firm payments and bank-to-firm lending, we investigate how lending to a firm is affected by same-bank lending to the firm's customers and suppliers. We show that the supply of loans to a firm increases when the firm's customers have loans from the same bank. We also find that negative information about a firm's top customer causes banks to tighten the loan supply to the firm, and particularly more so when the firm's sales are concentrated on this customer. These results suggest that lending to firms connected through the supply chain conveys valuable information to banks.

We document that reliance on internal ratings-based (IRB) models to compute credit risk and capital requirements reduces bank opacity. Greater reliance on IRB models is associated with lower absolute forecast error and reduced disagreement among analysts regarding expected bank earnings per share. These results are stronger for banks that apply internal ratings to the most opaque loans and adopt the advanced version of IRB models, which entail a more granular risk assessment and greater disclosure of risk parameters. The results stem from the higher earnings informativeness and the more comprehensive disclosure of credit risk in banks adopting internal ratings. We employ an instrumental variables approach to validate our findings.

Using hand-collected data on corporate bond and stock offerings, we identify the impact of government debt on corporate financing during World War I. The early twentieth century provides a unique opportunity to identify the impact of government debt on private financing because during this period (1) firms announced the amount they wanted to raise before each security offering and (2) the Treasury issued debt in discrete intervals. We identify the impact of Treasury issues by comparing differences in the amount firms offered to the amount they actually raised when the Treasury was borrowing to when the Treasury was not in the market. We find that long-term government bond offerings negatively affect both amount of long-term corporate bonds and dividend paying stocks issued. In contrast, we find no effect on short-term debt issue. Our findings suggest that investors view stable dividend paying stocks a close substitute for relatively safe long-term bonds.

In 1936–37, the Federal Reserve doubled member banks’ reserve requirements. Friedman and Schwartz (1963) famously argued that the doubling increased reserve demand and forced the money supply to contract, which they argued caused the recession of 1937–38. Using a new database on individual banks, we find that higher reserve requirements did not generally increase banks’ reserve demand or contract lending because reserve requirements were not binding for most banks. Aggregate effects on credit supply from reserve requirement increases were therefore economically small and statistically zero.

We study mortgagors’ attitudes toward strategic behavior following a foreclosure moratorium in Greece. To identify strategic delinquencies, we exploit the concurrent introduction of a debt discharge process that provides generous debt relief for borrowers who prove their inability to pay but entails high costs for those who can afford their mortgages. This setting creates distinct optimal strategies for delinquent borrowers: non-strategic mortgagors participate in the debt discharge process, whereas strategic borrowers use the moratorium to protect their homes. Our results indicate that borrower sophistication, aversion to moral hazard, banking relationships, and preference for liquidity play an important role in strategic behavior.

In China's credit markets with financial repression, state-controlled non-financial firms (SOEs) are privileged in gaining access to bank credit, while non-SOEs, especially those small- and medium-sized firms, are disadvantaged. Corporate re-lending emerges as a response wherein the former secure bank loans and then re-lend to the latter. We document the characteristics of inter-corporate loans from a sample of legal cases. We employ four empirical strategies to conduct a forensic study of re-lending by detecting abnormal relations between financial accounts of listed firms. State-controlled companies conduct more re-lending, and firms with better growth opportunities, stronger corporate governance, and more financial constraints engage less. We compare re-lending with entrusted loans and find that firms extending nonaffiliated entrusted loans conduct re-lending actively, while firms offering affiliated entrusted loans do not. We also compare inter-corporate loans with micro-credit company loans in a review of legal cases.

We study the effect on credit relationships of the Small and Medium Enterprises Supporting Factor (SME-SF), a regulatory risk weight reduction on small loans to SMEs. Employing a regression discontinuity design and matched bank-firm data from Italy, we find that a 1 percent drop in capital requirements causes an average 13 basis points reduction in the cost of credit. Moreover, with a novel measure of bank regulatory capital scarcity, we show that the drop is larger for banks facing tighter constraints. Furthermore, the drop is larger for firms with low switching costs, while the sharp assignment rule may have led to the rationing of marginal borrowers. Such findings indicate that the entire distribution of firms and banks’ characteristics plays a crucial role in determining the impact of regulatory capital changes.

This study investigates the role of asymmetric information for the pricing, issuance volume, and design of innovative securities. By analyzing the information that structured product issuers provide to the investors of those products, we can identify specific sources of asymmetric information between the issuers and investors in this market. We show that issuers exploit this information friction to offer products to investors that appear more profitable for the issuer. In addition, we find that the friction induces issuers to design products with higher information asymmetry. Our results suggest that product issuers’ behavior increases information frictions in the financial system.

We investigate whether the Federal Reserve’s Paycheck Protection Program Liquidity Facility (PPPLF) boosted commercial bank Paycheck Protection Program (PPP) lending. To determine whether this facility had a causal effect, we use pre-existing familiarity with the Federal Reserve’s discount window as an instrumental variable. We show that the PPPLF materially bolstered bank PPP lending and provided a meaningful funding backstop for banks that did not use the facility. Our paper is one of the first to quantitatively illustrate the effectiveness of a central bank facility as a funding backstop.