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Bank heterogeneity and capital allocation: evidence from \\"fracking\\" shocks

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Abstract

This paper empirically investigates banks? ability to reallocate capital. I use unconventional energy development to identify unsolicited deposit inflows and then I estimate how banks allocate these deposits over the recent business cycle. To condition on credit demand, I compare banks? allocations within affected areas over time and in the cross section. When conditions deteriorate, liquid asset allocations increase and loan allocations decrease. Banks with fewer funding sources and higher capital ratios reduce loan allocations more than nearby peers. My results suggest that during adverse times, precautionary liquidity and risk aversion can impede capital reallocation by banks, even in a developed economy.

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  • Matthew Plosser, 2014. "Bank heterogeneity and capital allocation: evidence from \\"fracking\\" shocks," Staff Reports 693, Federal Reserve Bank of New York.
    • Handle: RePEc:fip:fednsr:693
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    2. Ross Levine & Chen Lin & Zigan Wang & Wensi Xie, 2018. "Bank Liquidity, Credit Supply, and the Environment," Working Papers id:12565, eSocialSciences.
    3. Petkov, Ivan, 2023. "Small business lending and the bank-branch network," Journal of Financial Stability, Elsevier, vol. 64(C).
    4. Viktar Fedaseyeu & Erik Gilje & Philip E. Strahan, 2015. "Voter Preferences and Political Change: Evidence from Shale Booms," NBER Working Papers 21789, National Bureau of Economic Research, Inc.
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    6. Knut Are Aastveit & Andrea Carriero & Todd E. Clark & Massimiliano Marcellino, 2017. "Have Standard VARS Remained Stable Since the Crisis?," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 32(5), pages 931-951, August.
    7. Cortés, Kristle Romero & Strahan, Philip E., 2017. "Tracing out capital flows: How financially integrated banks respond to natural disasters," Journal of Financial Economics, Elsevier, vol. 125(1), pages 182-199.
    8. Ivan T. Ivanov & Marco Macchiavelli & João A. C. Santos, 2022. "Bank lending networks and the propagation of natural disasters," Financial Management, Financial Management Association International, vol. 51(3), pages 903-927, September.
    9. Choi, Changhwan & Chung, Chune Young, 2024. "The effect of shale gas booms on environmental CSR activity," International Review of Financial Analysis, Elsevier, vol. 95(PB).
    10. Erik P. Gilje, 2019. "Does Local Access to Finance Matter? Evidence from U.S. Oil and Natural Gas Shale Booms," Management Science, INFORMS, vol. 65(1), pages 1-18, January.
    11. Ama Samarasinghe & Katherine Uylangco, 2022. "Stock market liquidity and traditional sources of bank business," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 62(3), pages 3107-3145, September.
    12. Petkov, Ivan, 2015. "Small Business Lending and the Bank-Branch Network," MPRA Paper 85762, University Library of Munich, Germany, revised 13 Oct 2017.
    13. Erik Gilje & Elena Loutskina & Philip E. Strahan, 2013. "Exporting Liquidity: Branch Banking and Financial Integration," NBER Working Papers 19403, National Bureau of Economic Research, Inc.

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    More about this item

    Keywords

    financial intermediation; banks; business cycles;
    All these keywords.

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles

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