Di Maggio, Marco (2014) Essays on Financial Intermediation. [Tesi di dottorato]

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In Chapter 1, co-authored with Amir Kermani we ask the following question: can an increase in the supply of credit induce a boom and bust in house prices and real economic activity? This paper exploits the federal preemption of national banks from local anti-predatory laws to gauge the causal effect of the supply of credit on the real economy. Specifically, we exploit the heterogeneity in the market share of national banks across counties as of 2003, as well as heterogeneity in states anti-predatory laws to instrument for the outward shift in the supply of credit. We first show that if we compare counties in the top versus the bottom decile of presence of national banks in states with anti-predatory laws, the preemption regulation resulted in an 11% increase in annual loan issuance. Our estimates show that to such an increase in annual loan issuance correspond a 12% total increase in house prices and a 2% increase in employment in the non-tradable sectors, followed by a bust of similar magnitude in the subsequent years. Finally we show that the increase in the supply of credit reduced mortgages' delinquency rates during the boom years, but resulted in higher delinquency rates during the bust years. In Chapter 2, co-authored with Marcin Kacperczyk we investigate the effect of the zero-bound interest rate policy on money market funds industry. We find that, as the Fed funds rate approaches zero bound, money funds display reaching for yield incentives in that they invest in riskier asset classes and hold less diversified portfolios. The reduction in interest rates also increases the likelihood of funds exiting the market and lowers expenses funds charge to investors. Consistent with the reputation concerns at stake, we find that funds affiliated with large financial institutions are more likely to exit the market while funds managed by independent asset management companies take on relatively more risk. Additional evidence from the Fed's forward guidance policy corroborates the findings. In Chapter 3, co-authored with Marshall Van Allstyne we ask the following question: what drives workers to seek information from their peers? And how does communication affect employee performance? We address these questions using an original panel data set that includes all accesses to an information-sharing platform, together with performance measures of all loan officers at a major commercial bank. We show that low skill agents benefit the most from consuming others' information. Moreover, we provide evidence that job rotation destroys specialized human capital, such as soft information about local borrowers. Finally, by instrumenting the demand for information with the exogenous variation arising from differences in social norms among branches, we are able to assess the causal effect of information sharing on performance.

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