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Hometown Lending

Published online by Cambridge University Press:  18 September 2020

Ivan Lim  and
Duc Duy Nguyen Open the ORCID record for Duc Duy Nguyen [Opens in a new window]
Ivan Lim
Affiliation:
Durham University Business [email protected]
Duc Duy Nguyen*
Affiliation:
King’s College London King’s Business School
*
[email protected] (corresponding author)
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Abstract

Banks open more branches and make more lending near their 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.

Type
Research Article
Information
Journal of Financial and Quantitative Analysis , Volume 56 , Issue 8 , December 2021 , pp. 2894 - 2933
Copyright
© The Author(s), 2020. Published by Cambridge University Press on behalf of the Michael G. Foster School of Business, University of Washington

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Footnotes

We are grateful to Paul Malatesta (the editor) and Yiming Qian (the referee) for very helpful comments and suggestions. We also thank Seth Armitage, Thorsten Beck, John Beshears, Zhong Chen, Kai Choy, Colin Clubb, Cláudia Custódio, Jo Danbolt, Bob DeYoung, Tarik Driouchi, Angela Gallo, Niklas Gawehn, Angelica Gonzalez, Paul Guest, Jens Hagendorff, Niels Hermes (discussant), Tom Hough, Elizabeth Kiser (discussant), Zicheng Lei, Tobias Meyll (discussant), Tony Moore, Maurizio Murgia, Linh Nguyen, Trang Nguyen, Dimitris Petmezas, Ben Sila, Raymond So, Wei Song, Simone Varotto, John Wilson, Bin Xu, Chao Yin, Yeqin Zeng, and participants at the 2019 FMA conference, 2018 Community Banking Conference, 2018 Social Finance and Financial Technology conference, 2018 EFMA conference, and seminar participants at the Free University of Bozen-Bolzano, King’s College London, and the Universities of East Anglia, Reading, Surrey, and Swansea for various helpful comments. The usual disclaimer applies.

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