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Banking deregulation and credit supply: Distinguishing the balance sheet and the competition channels

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  • Chu, Yongqiang
Abstract
This paper studies how interstate banking deregulation affects credit supply, focusing on distinguishing the balance sheet and bank competition channels. Using a regression discontinuity design, I find that interstate banking deregulation affects credit supply, not only by legally impacted commercial banks, but also by non-legally impacted non-bank lenders. Controlling for lender-year fixed effects to isolate the balance sheet effect, I find that credit supply by the same lender varies with interstate banking restrictions in different states. Overall, the results suggest that the impact of interstate banking deregulation is mostly driven by the bank competition channel.

Suggested Citation

  • Chu, Yongqiang, 2018. "Banking deregulation and credit supply: Distinguishing the balance sheet and the competition channels," Journal of Financial Intermediation, Elsevier, vol. 35(PA), pages 102-119.
    • Handle: RePEc:eee:jfinin:v:35:y:2018:i:pa:p:102-119
    DOI: 10.1016/j.jfi.2018.03.005
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    Cited by:

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    2. W. Blake Marsh & Rajdeep Sengupta, 2017. "Competition and Bank Fragility," Research Working Paper RWP 17-6, Federal Reserve Bank of Kansas City.
    3. Wang, Chaochao & Dong, Yan & Ge, Ran, 2023. "Bank branching deregulation and the credit risk of the regional banking sector: Evidence from city commercial banks in China," Emerging Markets Review, Elsevier, vol. 55(C).
    4. Shen, Zhihan & Zhang, Ruipeng & Li, Peigong, 2024. "Local government debt and corporate tax avoidance: Evidence from China," International Review of Economics & Finance, Elsevier, vol. 93(PA), pages 985-1000.
    5. Taskin, Ahmet Ali & Yaman, Firat, 2023. "The effect of branching deregulation on finance wage premium," FAU Discussion Papers in Economics 08/2023, Friedrich-Alexander University Erlangen-Nuremberg, Institute for Economics.
    6. Liang, Yunjia & Zhou, Bo & Zhao, Shaoyang, 2024. "Risking or de-risking? The effect of banking competition on large state-owned banks and small and medium-sized enterprise lending: Evidence from China," International Review of Financial Analysis, Elsevier, vol. 94(C).
    7. Pu, Zhengning & Yang, Mingyan, 2022. "The impact of city commercial banks’ expansion on China’s regional energy efficiency," Economic Analysis and Policy, Elsevier, vol. 73(C), pages 10-28.
    8. Mattia Girotti & Federica Salvadè, 2022. "Competition and Agency Problems Within Banks: Evidence from Insider Lending," Management Science, INFORMS, vol. 68(5), pages 3791-3812, May.
    9. Huang, Sheng & Maharjan, Johan & Thakor, Anjan V., 2020. "Disagreement-induced CEO turnover," Journal of Financial Intermediation, Elsevier, vol. 43(C).
    10. Stefano Colonnello, 2022. "The Real Effects of Universal Banking: Does Access to the Public Debt Market Matter?," Journal of Financial Services Research, Springer;Western Finance Association, vol. 61(1), pages 77-110, February.

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    More about this item

    Keywords

    Interstate banking deregulation; Bank competition channel; Balance sheet channel; Commercial real estate; Regression discontinuity design;
    All these keywords.

    JEL classification:

    • G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • R33 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Nonagricultural and Nonresidential Real Estate Markets

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