DP12994 Bank Lending in the Knowledge Economy

Author(s): Giovanni DellAriccia, Dalida Kadyrzhanova, Camelia Minoiu, Lev Ratnovski
Publication Date: June 2018
Keyword(s): bank lending, commercial loans, corporate intangible assets, real estate loans
JEL(s): E22, E44, G21
Programme Areas: Financial Economics
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=12994

We study bank portfolio allocations during the transition of the real sector to a knowledge economy in which firms increasingly use intangible assets. We show that higher corporate investment in intangible assets slows down banks' commercial lending. Banks reallocate the resulting lending capacity to other assets, notably mortgages. The findings are consistent with financial intermediation frictions due to lower collateral value of corporate intangible assets. Additional tests rule out alternative explanations such as higher mortgage demand. We estimate that higher corporate intangible assets conservatively explain 25-40% of the decline in bank commercial lending since the mid-1980s.