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Bank Lending in the Knowledge Economy

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  • Dell'Ariccia, Giovanni
  • Kadyrzhanova, Dalida
  • Ratnovski, Lev

Abstract

We study bank portfolio allocations during the transition of the real sector to a knowledge economy in which firms increasingly use intangible assets. We show that higher corporate investment in intangible assets slows down banks' commercial lending. Banks reallocate the resulting lending capacity to other assets, notably mortgages. The findings are consistent with financial intermediation frictions due to lower collateral value of corporate intangible assets. Additional tests rule out alternative explanations such as higher mortgage demand. We estimate that higher corporate intangible assets conservatively explain 25-40% of the decline in bank commercial lending since the mid-1980s.

Suggested Citation

  • Dell'Ariccia, Giovanni & Kadyrzhanova, Dalida & Ratnovski, Lev, 2018. "Bank Lending in the Knowledge Economy," CEPR Discussion Papers 12994, C.E.P.R. Discussion Papers.
  • Handle: RePEc:cpr:ceprdp:12994
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    Keywords

    Corporate intangible assets; Bank lending; Commercial loans; Real estate loans;
    All these keywords.

    JEL classification:

    • E22 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Investment; Capital; Intangible Capital; Capacity
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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