Essays on Banking Competition
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2016
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Abstract
I study local shocks to consumer credit supply arising from the opening
of bank-related retail stores. Bank-related store openings coincide with
sharp increases in credit card placements in the neighborhood of the
store, in the months surrounding the store opening, and with the bank
that owns the store. I exploit this relationship to instrument for new
credit cards at the individual level, and find that obtaining a new
credit card sharply increases total borrowing as well as default risk,
particularly for risky and opaque borrowers. In line with theories of
default externality, I observe that existing lenders react to the
increased consumer borrowing and associated riskiness by contracting
their own supply. In particular, in the year following the issuance of a
new credit card, banks without links to stores reduce credit card limits
by 24-51%, offsetting most of the initial increase in total credit
limits.
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Correia, Sergio (2016). Essays on Banking Competition. Dissertation, Duke University. Retrieved from https://hdl.handle.net/10161/12246.
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