Risk Overhang and Loan Portfolio Decisions: Small Business Loan Supply before and during the Financial Crisis

DeYoung, Robert; Gron, Anne; Torna, Gökhan; Winton, Andrew

doi:10.1111/jofi.12356

Cited by 142 publications

(33 citation statements)

References 55 publications

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“…Total loan growth rates are higher during the crisis, and higher crisis growth rates prevail across all loan categories. Our results are generally consistent with those of DeYoung et al (2015) in their study of U.S. community banks.…”

Section: Resultssupporting

confidence: 92%

U.S. Bank Lending Activity in the Postcrisis World

Cyree

Griffiths

Winters³

2016

J of Financial Research

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There are three main reasons banks may not be lending. First, banks could be rationing credit. We show that banks have excess reserves of more than $2 trillion, so demand exceeding supply is unlikely. Second, banks could be experiencing a capital crunch. We find no evidence of a capital crunch. Third, banks could be choosing to restrict lending, creating a credit crunch. We find that postcrisis loan growth rates are lower than crisis loan growth rates, but postcrisis loan growth is similar to precrisis growth. We find no evidence to suggest that banks are systematically restricting lending.

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Section: Resultssupporting

confidence: 92%

U.S. Bank Lending Activity in the Postcrisis World

Cyree

Griffiths

Winters³

2016

J of Financial Research

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“…23. The negative coefficient on this variable could also be related to the loan overhang problem analyzed by DeYoung et al (2015). Specifically, rising delinquencies on nonmortgage loans could have made these loans more illiquid in the crisis, causing banks to reduce new mortgage lending in an attempt to restore their capital-asset ratios.…”

Section: Regression Results For the Restricted Samplementioning

confidence: 99%

The Cross‐Market Spillover of Economic Shocks through Multimarket Banks

Berrospide¹,

Black²,

Keeton³

2016

J of Money Credit Banking

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This study investigates the mortgage lending of banks operating in multiple U.S. metropolitan areas during the housing market collapse of 2007–09. We show that multimarket banks reduced local portfolio lending in response to high overall mortgage delinquencies in their other markets, consistent with the view that local economic shocks can be transmitted to other regions through banks’ internal capital markets. This spillover was greatest when the bank lacked a branch presence and when the market was highly peripheral to the bank in terms of its total mortgage lending. These effects were not fully offset by securitization or other portfolio lenders.

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“…The impact of the SME loan portfolio-to-asset is negative and statistically significant in the second and third specifications. The presence of a potential 'overhang risk' (DeYoung et al, 2015) that is proxied by a high SME loan portfolio-to-asset ratio does not seem to result in a reduction in the supply of SME loans but instead in a decline in the share of SME loans to total assets. The 'overhang risk' stems from the fact that the SME loan portfolio is less liquid than other types of loan portfolios (e.g.…”

Section: The Impact On Sme Lendingmentioning

confidence: 94%

“…SME tÀ1 is the ratio of total gross SME loan portfolio to total assets in tÀ1. The relative size of the SME loan portfolio is intended to measure a potential 'overhang effect', as proposed by DeYoung et al (2015). This effect is expected to have a negative impact on SME loan growth.…”

Section: Empirical Methodologymentioning

confidence: 99%

Mortgage‐backed Securitization and SME Lending During the Financial and Economic Crisis: Evidence from the Italian Cooperative Banking System

Castellani

2017

Economic Notes

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I investigate the determinants of the securitization activities of Italian cooperative banks during the financial and economic crisis (2007–2014) and the impact of securitization on the supply of loans to SMEs. The less deposit‐funded, less profitable and less capitalized cooperative banks are, the more likely they are to securitize and the more likely it is that they will securitize to a larger extent. Furthermore, I find that securitization has not directly affected the supply of new SME loans. However, there is strong evidence of a risk‐rebalancing effect of securitization on the balance sheet, especially in the period 2010–2014.

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Risk Overhang and Loan Portfolio Decisions: Small Business Loan Supply before and during the Financial Crisis

Cited by 142 publications

References 55 publications

U.S. Bank Lending Activity in the Postcrisis World

U.S. Bank Lending Activity in the Postcrisis World

The Cross‐Market Spillover of Economic Shocks through Multimarket Banks

Mortgage‐backed Securitization and SME Lending During the Financial and Economic Crisis: Evidence from the Italian Cooperative Banking System

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