Do universal banks finance riskier but more productive firms?

Daniel Neuhann and Farzad Saidi

Journal of Financial Economics, 2018, vol. 128, issue 1, 66-85

Abstract: Using variation in bank scope generated by the stepwise repeal of the Glass–Steagall Act in the US, we show that the deregulation of universal banks allowed them to finance firms with 14% higher volatility. This increase in risk is compensated by lasting improvements in firms’ total factor productivity of 3%. Using bank scope-expanding mergers to identify shocks to universal banks’ private information about borrower firms, we provide evidence that informational economies of scope across loans and non-loan products account for the firm-level real effects of universal banking.

Keywords: Universal banking; Financial deregulation; Bank scope; Firewalls; Cross-selling (search for similar items in EconPapers)
JEL-codes: E20 G20 G21 (search for similar items in EconPapers)
Date: 2018
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (32)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jfinec:v:128:y:2018:i:1:p:66-85

DOI: 10.1016/j.jfineco.2018.01.011

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