Article ID | Journal | Published Year | Pages | File Type |
---|---|---|---|---|
7361875 | Journal of Financial Economics | 2018 | 56 Pages |
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.
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Authors
Daniel Neuhann, Farzad Saidi,