EconPapers    
Economics at your fingertips  
 

Derivative use, ownership structure and lending activities of US banks

Benjamin A. Abugri () and Theophilus T. Osah ()
Additional contact information
Benjamin A. Abugri: Southern Connecticut State University
Theophilus T. Osah: University of Texas Rio Grande Valley

Journal of Economics and Finance, 2021, vol. 45, issue 1, No 7, 146-170

Abstract: Abstract Following the 2007–2008 financial crisis, there is widespread interest in understanding how derivative use drives bank lending behavior. Our paper examines the impact of bank ownership structure on the relationship between derivative use and lending activities of U.S. banks. We find that lending recovered faster in larger banks than smaller banks post-crisis and in line with Diamond’s (Diamond DW 1984 Financial intermediation and delegated monitoring. Rev Econ Stud 51:393–414) systemic risk reduction theory, derivative use is positively associated with lending growth. Ownership is significant in explaining the magnitude of the relationship even after controlling for alternative specifications of the derivative use variable. In both normal and crisis periods, the speed of adjustment of lending to derivatives use by stock banks lags that of mutual banks. We suggest that speculative trading in derivatives substitutes for lending growth to a larger extent for stock banks compared to mutual banks. These findings may have important implications for investors and bank regulators.

Keywords: Commercial banks; Derivative use; Ownership structure; Bank lending; Dynamic GMM method (search for similar items in EconPapers)
JEL-codes: G21 G32 (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed

Downloads: (external link)
http://link.springer.com/10.1007/s12197-020-09535-3 Abstract (text/html)
Access to the full text of the articles in this series is restricted.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:spr:jecfin:v:45:y:2021:i:1:d:10.1007_s12197-020-09535-3

Ordering information: This journal article can be ordered from
http://www.springer. ... cs/journal/12197/PS2

DOI: 10.1007/s12197-020-09535-3

Access Statistics for this article

Journal of Economics and Finance is currently edited by James Payne

More articles in Journal of Economics and Finance from Springer, Academy of Economics and Finance Contact information at EDIRC.
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().

 
Page updated 2021-01-15
Handle: RePEc:spr:jecfin:v:45:y:2021:i:1:d:10.1007_s12197-020-09535-3