Working papers

Big Broad Banks: How Does Cross-Selling Affect Lending? Job Market Paper

EFA Doctoral Tutorial Best Paper Prize 2019

Abstract: Using unique micro-data that contain the internal information on all corporate customers of a large Nordic bank, I show that combining loan and non-loan products (cross-selling) has two benefits. First, it increases credit supply, especially in recessions. Second, it increases the likelihood of receiving lenient treatment in delinquency. I argue that non-loan relationships play an important role in determining credit supply and debt renegotiation, not only by (i) mitigating information asymmetries (as suggested in earlier literature), but also by (ii) increasing the profitability of the relationship. Exploiting an exogenous and differential change in similar products' profitability due to the Basel II implementation, I estimate the causal effect of this new profit channel on credit supply. A 20 percent decrease in non-loan products' profitability (i) reduces credit supply to affected firms by 13 percent (600,000 USD) compared with unaffected firms, and (2) reduces likelihood of receiving lenient treatment for affected firms by 30 percent (13 pp) compared with unaffected firms, conditional on being delinquent.

Presented at: AFA 2021 (scheduled), EFA 2020 (scheduled), EFA 2019 (Doctoral Tutorial), Sveriges Riksbank, Stockholm School of Economics, Cornerstone Research, Tilburg University, ESSEC, Singapore Management University, National University of Singapore, Southern Methodist University, University of Florida, Norwegian School of Economics, Copenhagen Business School, EPFL, Bank for International Settlements, NOVA School of Business and Economics, Bocconi University

Cost of loans and moral hazard: Evidence from a quasi-experiment in Sweden

(with Clara Fernström)

Abstract: We document the effects of higher borrowing cost on private firms in the presence of financial frictions by exploiting a novel quasi-experiment and a unique and comprehensive dataset from Sweden. In June 2010, the central bank of Sweden increased the repo rate unexpectedly and exposed firms with long term loan maturing right before or after the hike to different cost of borrowing. Consistent with the debt overhang theory, we find that higher cost of borrowing has a significant negative effect on investment, but more for highly levered firms. These results are robust to carefully controlling for firms' credit demand. Our findings highlight the importance of balance sheet heterogeneity in the responsiveness of firms to interest rate shocks.

Presented at: CEPR Second Annual Spring Symposium in Financial Economics (PhD poster session), Sveriges Riksbank, Stockholm School of Economics

Work in progress

How does government funding affect private credit supply to start-ups?

(with Niklas Amberg, Tor Jacobson and Per Strömberg)

Publications

Bank misconduct and online lending

(with Christoph Bertsch, Isaiah Hull, Xin Zhang)

forthcoming at the Journal of Banking and Finance

Abstract: We introduce a high quality proxy for bank misconduct that is constructed from Consumer Financial Protection (CFPB) complaint data. We employ this proxy to measure the impact of bank misconduct on the expansion of online lending in the United States. Using nearly complete loan and application data from the online lending market, we demonstrate that bank misconduct is associated with a statistically and economically significant increase in online lending demand at the state and county levels. This result is robust to the inclusion of bank credit supply shocks and holds for both broader and more narrowly-defined bank misconduct measures.

Presented at: EFA 2018, CEPR Third European Workshop on Household Finance, Cleveland Fed, 4th IWH-FIN-FIRE Workshop in Halle, Sveriges Riksbank, Stockholm School of Economics