Does bank opacity affect lending?

Yi Zheng

Journal of Banking & Finance, 2020, vol. 119, issue C

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.

Keywords: Banking; Opacity; Lending; Wholesale funds (search for similar items in EconPapers)
JEL-codes: G01 G21 G28 (search for similar items in EconPapers)
Date: 2020
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (17)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jbfina:v:119:y:2020:i:c:s0378426620301667

DOI: 10.1016/j.jbankfin.2020.105900

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