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Exporting Liquidity: Branch Banking and Financial Integration

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  • ERIK P. GILJE
  • ELENA LOUTSKINA
  • PHILIP E. STRAHAN

Abstract

Using exogenous liquidity windfalls from oil and natural gas shale discoveries, we demonstrate that bank branch networks help integrate U.S. lending markets. Banks exposed to shale booms enjoy liquidity inflows, which increase their capacity to originate and hold new loans. Exposed banks increase mortgage lending in nonboom counties, but only where they have branches and only for hard‐to‐securitize mortgages. Our findings suggest that contracting frictions limit the ability of arm's length finance to integrate credit markets fully. Branch networks continue to play an important role in financial integration, despite the development of securitization markets.

Suggested Citation

  • Erik P. Gilje & Elena Loutskina & Philip E. Strahan, 2016. "Exporting Liquidity: Branch Banking and Financial Integration," Journal of Finance, American Finance Association, vol. 71(3), pages 1159-1184, June.
    • Handle: RePEc:bla:jfinan:v:71:y:2016:i:3:p:1159-1184
    DOI: 10.1111/jofi.12387
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