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Hometown lending

Research output: Contribution to journalArticle

Ivan Lim, Duc Duy Nguyen

Original languageEnglish
Pages (from-to)1-62
Number of pages62
JournalJOURNAL OF FINANCIAL AND QUANTITATIVE ANALYSIS
DOIs
E-pub ahead of print18 Sep 2020

King's Authors

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.

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