Lending Organization and Credit Supply During the 2008–2009 Crisis

Abstract

Using a dataset that combines bank organizational variables, information on firms' credit demand and balance sheet indicators, we investigate the impact of lending organization on credit dynamics during the 2008–2009 crisis period. Our main findings suggest that the variables shaping the organization of a bank in its lending to non‐financial firms have a complex impact on its ability to expand credit. Banks that made substantial use of credit scoring techniques actually reduced their credit expansion during the economic downturn. At the same time, banks that delegated more power to their branch managers were likely to expand loans at a higher rate. Finally, contrary to the evidence from the pre‐crisis period, we find that longer branch manager tenure in the same branch is detrimental to the credit growth rate. These findings are robust to a wide set of robustness checks.