Essays on financial intermediation, geography, and regulation

Gokmen, Seyit (2022). Essays on financial intermediation, geography, and regulation. University of Birmingham. Ph.D.

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Abstract

This thesis presents three essays that shed light on key aspects of financial intermediaries’ lending behavior. Chapter two explores how land use regulations affect credit supply in the mortgage market. I find that strict regulations increase loan approvals, loan-to-value ratios, and house prices. Banks have strong incentives to provide more credit to borrowers in highly-regulated areas because future property values (i.e. collateral) are preserved by land use regulations that limit the supply of housing. In chapter three, we study how kinship influences bank lending and loan loss provisioning. Using historical data on immigration waves from Europe to the United States in the early 20th century that determine kinship today, we find that in societies with tighter kinship networks banks originate less credit and set aside greater amounts of loan loss reserves to mitigate credit risk. The findings are consistent with evidence from the literature that individuals in kinship-intensive societies are less likely to trust strangers and the importance of relationships in banking. Chapter four explores how marketplace lenders evaluate borrowers’ loan applications across regions with different economic prospects. After controlling borrower characteristics, we find that marketplace investors prioritize borrowers from regions with better economic prospects, and screen the borrowers more leniently. The results imply that screening intensity is a reaction of marketplace investors against informational frictions.

Type of Work:

Thesis (Doctorates > Ph.D.)

Award Type:

Doctorates > Ph.D.

Supervisor(s):