The impact of banks’ liability management on large lending volume. Empirical Evidence from US Banks

Tsagkanos, Athanasios and Andriakopoulos, Konstantinos (2025): The impact of banks’ liability management on large lending volume. Empirical Evidence from US Banks.

Abstract

Banks provide credit to large firms either to finance large firms’ investment projects with positive net present values or to lend out SMEs indirectly through the expansion of trade credit by large firms which have Access to bank credit. The aim of the current article is twofold: to provide empirical evidence that time deposits affect the supply of large lending and to study whether the large lending volume differs according to banks’ characteristics. We employ a Heckman’s sample selection model to take into account the latent (unobserved) mechanism that banks use to decide whether to lend out large firms either to finance their goals or to provide trade credit to SMEs. We create a panel of US banks acquired from Statistics on Depository Institutions (SDI) report made by Federal Deposit Insurance Corporation (FDIC) covering the period from 2012 to 2021. The results of this study offer us empirical evidence of positive relationship between large lending volume and time deposits, which means that the availability of long time-term liabilities increases large lending as this flexibility of banks’ liability management implies that banks can aggressively expand their assets obtaining funds (by issuing time deposits) as they were needed.

• Item Type: MPRA Paper
• Language: English
• Keywords: Banking ; Large Lending; Time Deposits, Sample Selection
• Subjects: C - Mathematical and Quantitative Methods > C2 - Single Equation Models ; Single Variables > C23 - Panel Data Models ; Spatio-temporal Models; C - Mathematical and Quantitative Methods > C5 - Econometric Modeling > C51 - Model Construction and Estimation; E - Macroeconomics and Monetary Economics > E5 - Monetary Policy, Central Banking, and the Supply of Money and Credit; G - Financial Economics > G2 - Financial Institutions and Services; G - Financial Economics > G2 - Financial Institutions and Services > G21 - Banks ; Depository Institutions ; Micro Finance Institutions ; Mortgages

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