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    Rights statement: This is the author’s version of a work that was accepted for publication in Journal of Financial Economics. Changes resulting from the publishing process, such as peer review, editing, corrections, structural formatting, and other quality control mechanisms may not be reflected in this document. Changes may have been made to this work since it was submitted for publication. A definitive version was subsequently published in Journal of Financial Economics, ?, ?, 2021 DOI: 10.1016/j.jfineco.2020.07.021

    Accepted author manuscript, 1.49 MB, PDF document

    Embargo ends: 4/09/22

    Available under license: CC BY-NC-ND: Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International License

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Banks as Patient Lenders: Evidence from a Tax Reform

Research output: Contribution to journalJournal articlepeer-review

E-pub ahead of print
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<mark>Journal publication date</mark>4/03/2021
<mark>Journal</mark>Journal of Financial Economics
Volume0
Number of pages21
Pages (from-to)0-0
Publication StatusE-pub ahead of print
Early online date4/03/21
<mark>Original language</mark>English

Abstract

We provide new evidence on how deposit funding affects bank lending. For identification, we exploit a tax reform in Italy that induced households to substitute bank bonds with deposits. We find that banks with larger increases in deposits expand the supply of credit lines and long-term credit to low-risk firms. Additional evidence indicates that these results are consistent with theories emphasizing the demandable nature of the deposit contract rather than theories stressing the stability of deposit funding due to government guarantees. In this regard, we show that banks under stress face large runs on retail deposits, but not on retail bonds.

Bibliographic note

This is the author’s version of a work that was accepted for publication in Journal of Financial Economics. Changes resulting from the publishing process, such as peer review, editing, corrections, structural formatting, and other quality control mechanisms may not be reflected in this document. Changes may have been made to this work since it was submitted for publication. A definitive version was subsequently published in Journal of Financial Economics, ?, ?, 2021 DOI: 10.1016/j.jfineco.2020.07.021