Decision-Making Delegation in Banks

Jennifer Dlugosz (), Yong Kyu Gam (), Radhakrishnan Gopalan and Janis Skrastins ()
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Jennifer Dlugosz: Division of Research and Statistics, Board of Governors of the Federal Reserve System, Washington, District of Columbia 20551
Yong Kyu Gam: School of Business, University College Dublin, D04 C1P1 Dublin, Ireland
Janis Skrastins: Olin Business School, Washington University in St. Louis, St. Louis, Missouri 63130

Management Science, 2024, vol. 70, issue 5, 3281-3301

Abstract: Using natural disasters as shocks to local economies, we document that a bank branch’s ability to set deposit rates locally has real effects. Following disasters, branches with rates set locally increase deposit rates more and experience higher deposit volumes in affected counties. Consistent with imperfect insurance from internal capital markets, banks with more branches setting rates locally relatively expand mortgage lending in affected counties. House prices recover faster in local areas where more branches’ rates are set locally.

Keywords: banks; organizational structure; branch banking (search for similar items in EconPapers)
Date: 2024
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