Have banks caught corona? Effects of COVID on lending in the U.S.

By Thorsten Beck, Jan Keil
Journal of Corporate Finance | February 2022

DOI

doi.org/10.1016/j.jcorpfin.2022.102160

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Citation

Beck, Thorsten., Keil, Jan. Have banks caught corona? Effects of COVID on lending in the U.S. Journal of Corporate Finance doi.org/10.1016/j.jcorpfin.2022.102160.

Journal of Corporate Finance, 2022

Abstract

Exploiting spatial and time variation, we find that banks geographically more exposed to lockdown measures experience an increase in loss provisions and non-performing loans. Exposures to the pandemic itself have a similar, but slightly weaker effect. We observe an increase in small business lending driven by government-guaranteed loans which seem to replace regular loans. Interestingly, lenders more exposed to lockdown measures rely more on government-guaranteed loans – even when controlling for borrower exposure. Finally, we observe a reduction in the number and average amount of syndicated loans for banks more affected by the pandemic, as well as an increase in interest spreads. These findings point to a negative impact of the pandemic on the supply side of finance, to previously unknown side effects of government support, and to the critical role of banks in channeling government support measures to small firms.

Jan Keil is an Assistant Professor of Finance at the Indian School of Business (ISB). His research focuses on disruptive and technology-driven change in financial intermediation, including payments, banking, consumer finance, and money. One current project explores the geopolitical motivations behind central bank digital currencies and their effect on payment firms (revised and resubmitted to the Journal of Finance). Another project analyses the economics of buy-now-pay-later (BNPL) for e-commerce merchants (revised and resubmitted to the Journal of Financial Economics).

Professor Keil has published in the Journal of Financial and Quantitative Analysis and served as a referee for the Review of Financial Studies. He has worked with Manju Puri, Tobias Berg, Thorsten Beck, and Steven Ongena.

He has received research grants from the German National Science Foundation (DFG) and the University of Zurich. Prior to joining ISB, he was affiliated with Humboldt University in Berlin and the University of the West Indies in Kingston, Jamaica. Professor Keil holds a PhD in Economics from the New School for Social Research, New York, and an MA-equivalent diploma in Political Science from Goethe University, Frankfurt.

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