Hometown lending

Ivan Lim; Duc Duy Nguyen

doi:10.1017/S0022109020000769

Hometown lending

Ivan Lim, Duc Duy Nguyen

Accounting & Financial Management

Durham University

Research output: Contribution to journal › Article › peer-review

27 Citations (Scopus)

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.

Original language	English
Pages (from-to)	1-62
Number of pages	62
Journal	JOURNAL OF FINANCIAL AND QUANTITATIVE ANALYSIS
DOIs	https://doi.org/10.1017/S0022109020000769
Publication status	E-pub ahead of print - 18 Sept 2020

Keywords

home bias
CEOs
banks
lending
information

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10.1017/S0022109020000769

https://www.cambridge.org/core/journals/journal-of-financial-and-quantitative-analysis/article/hometown-lending/FB150BD47E4B250BD57D7EA5810249DE

Cite this

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title = "Hometown lending",

abstract = "Banks open more branches and make more lending near their Chief Executive Officers{\textquoteright} (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{\textquoteright} 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{\textquoteright} hometowns.",

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AB - 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.

KW - home bias

KW - CEOs

KW - banks

KW - lending

KW - information

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ER -

Hometown lending

Abstract

Keywords

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