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Does bank opacity affect lending?

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  • Zheng, Yi

Abstract

Examining a sample of bank holding companies in the United States, we find that opacity has a negative effect on bank loan growth. This effect is more pronounced for banks that are more reliant on wholesale funds. A further analysis of the relationship between opacity and wholesale funds confirms our hypothesis that opacity negatively affects lending via a wholesale funding channel. Moreover, our results suggest that the negative effect of opacity on lending is less pronounced for banks with stronger capitalization. We also show that this effect was stronger during the 2007–2009 financial crisis and is mitigated by a high GDP growth rate, indicating that a strong (weak) macroeconomic condition tends to mitigate (aggravate) such an effect.

Suggested Citation

  • Zheng, Yi, 2020. "Does bank opacity affect lending?," Journal of Banking & Finance, Elsevier, vol. 119(C).
    • Handle: RePEc:eee:jbfina:v:119:y:2020:i:c:s0378426620301667
    DOI: 10.1016/j.jbankfin.2020.105900
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    More about this item

    Keywords

    Banking; Opacity; Lending; Wholesale funds;
    All these keywords.

    JEL classification:

    • G01 - Financial Economics - - General - - - Financial Crises
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation

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