The Impact of Objectives on Firm Decisions: Bank and Credit Union Lending in the Great Recession
Publication Date
11-8-2018
Abstract
Credit unions lent significantly more than profit-maximizing banks during the Great Recession. Loan growth rates were higher for the $1.3 trillion industry by as much as 10 percentage points at the peak of the crisis. Using a newly constructed database containing balance sheet information and loan-level activity, I compare institutions that faced identical borrowers in the same local credit markets and control for crises exposures to show that the effect is supply-driven. Further, the lending difference was sustained by 15-20 percent lower profit margins. Loan pricing, informational advantages, taxes, or the regulatory environment do not explain the results. Rather, member-oriented non-profit objectives precluded the slow economic recovery of credit unions after the financial crisis.
Document Type
Article
Keywords
Banking, Financial institutions, Firm objectives, Household finance, Great Recession, Credit supply
DOI
10.2139/ssrn.3281376
Source
SMU Cox: Finance (Topic)
Language
English
