I show that the ownership structure of banks and credit unions played a significant role in their lending behavior in the Great Recession. Using a rich dataset including balance sheet information, loan-level activity and offered interest rates between 2003- 2013, I show that lending growth rates were higher for credit unions by as much as 5-10 percentage points in the post-crisis period starting in mid-2007. Results hold when comparing firms facing the same borrowers within the same local credit markets and despite similar exposures to the crisis. Further, results are not driven by differences in loan pricing or the regulatory environment. Taken together, the ownership structure of credit unions, which mandate a cooperative environment rather than a purely profit- maximizing business, sustained its lending activity in the Great Recession.
Anna D. Cororaton
Contact Information
- Primary Email:
annadc@wharton.upenn.edu
- office Address:
2300 Steinberg-Dietrich Hall
3620 Locust Walk
Philadelphia, PA 19104-6367
Research Interests: Empirical Corporate Finance, Banking, Housing and Consumer Credit, Macro-Finance
Links: CV, Job Market Paper
Overview
I am a Finance PhD candidate at The Wharton School at the University of Pennsylvania with research interests in empirical corporate finance, banking, housing and consumer credit, and macro-finance.
My job market paper, entitled “The Impact of Firm Objectives on Lending: Banks and Credit Unions in the Great Recession” studies the impact of the profit-maximizing motive on the lending behavior of financial institutions.
I am on the job market this year and will be available for interviews at the AEA/AFA meetings in Philadelphia (Jan 5-7, 2018).
Education:
PhD in Finance, The Wharton School, University of Pennsylvania (Expected, 2018)
BA Economics, BA Mathematics, University of Pennsylvania (magna cum laude, 2009)
Work Experience:
Assistant Economist, Federal Reserve Bank of New York (2009-2012)
Research
“The Impact of Firm Objectives on Lending: Banks and Credit Unions in the Great Recession” (Job Market Paper).
I show that the non-profit maximizing objective of credit unions enabled them to lend significantly more than profit-maximizing banks during the Great Recession. Loan growth rates were higher for credit unions by as much as 10 percentage points at the peak of the crisis. Using a newly constructed database containing balance sheet information and loan-level activity, I compare institutions that faced identical borrowers in the same local credit markets and control for crises exposures to show that the effect is supply-driven. Further, the lending difference was sustained by lower profit margins. Loan pricing, informational advantages, taxes, or the regulatory environment do not explain the results. Rather, the non-profit objective implied by a cooperative ownership structure insulated the $1.3 trillion credit union industry from the slow economic recovery after the financial crisis.
“Liquidity Risk and Bank Stock Returns”, with Yasser Boualam.
Winner of Irwin Friend Doctoral Fellowship (Best Third Year Paper)
We document that higher measures of liquidity risk on bank balance sheets are associated with lower expected stock returns. We first calculate a measure of liquidity risk, referred to as the liquidity gap (LG), which measures how much of a bank’s volatile liabilities are covered by its stock of liquid assets. We show that the usual CAPM and Fama-French factor models do not fully explain the cross section of returns sorted according to this measure. A portfolio that is long in high liquidity risk banks and short on low liquidity risk banks delivers a statistically significant alpha of 6 percent annually. This effect is not driven by bank characteristics such as size, leverage or profitability, and appears to be driven solely by bank complexity.
Caplin, Andrew, Anna Cororaton and Joseph Tracy, “Is the FHA Creating Sustainable Homeownership?”, Real Estate Economics, Vol. 43, Issue 4, 2015, 957-992.
We produce first estimates of the sustainability of homeownership for recent Federal Housing Administration (FHA) borrowers. Unfortunately, the FHA does not produce its own statistics on sustainability. Neither does it permit researchers access to its data on internal refinances. This imposes significant barriers to entry for researchers who wish to track FHA borrower performance over time. We carefully construct the required tracking data to overcome this barrier. We forecast that no more than 75 percent of the 2007-2009 vintages of FHA borrowers will be able to successfully exit the FHA system. Our work raises questions about FHA’s role, its accounting and its accountability.
“Shadow Banking and the Real Economy” (Draft available upon request)
This paper compares traditional banking to shadow banking based on the type of security that funds the sector: money funds the former while money-like liabilities fund the latter. Using a parsimonious two-sector model of non-balanced growth that captures structural changes, I measure the relative productivity of the two sectors over time. Productivity of the shadow banking sector started at around 0.6 relative to traditional banking in the 1960’s, and peaked to 1.2 starting in the 2000’s. While it has fallen slightly since the recent crisis, shadow banking remains more productive relative to traditional banking. I also show that growth in money-like liabilities lag growth in output, contrary to the well-known leading relationship between traditional monetary aggregates and output growth.
Short Articles:
Sahin, Aysegul, Sagiri Kitao, Anna Cororaton and Sergiu Laiu “Why Small Businesses Were Hit Harder by the Recent Recession”, Current Issues in Economics and Finance, Vol. 17, No. 4, 2011.
Peach, Richard, Robert Rich and Anna Cororaton, “How Does Slack Influence Inflation?”, Current Issues in Economics and Finance, Vol. 17, No. 3, 2011.
- Anna Cororaton, Impact of Ownership Structure on Bank and Credit Union Lending in the Great Recession (Job Market Paper). Abstract
- M Yasser Boualam and Anna Cororaton (Work In Progress), Liquidity Risk and Bank Stock Returns. AbstractDescription
We document that higher measures of liquidity risk on bank balance sheets are associated with lower expected stock returns. We first calculate a measure of liquidity risk, referred to as the liquidity gap (LG), which measures how much of a bank’s volatile liabilities are covered by its stock of liquid assets. We show that the usual CAPM and Fama-French factor models do not fully explain the cross section of returns sorted according to this measure. A portfolio that is long in high liquidity risk banks and short on low liquidity risk banks delivers a statistically significant alpha of 6 percent annually. This effect is not driven by bank characteristics such as size, leverage or profitability, and appears to be driven solely by bank complexity.
Winner: Irwin Friend Doctoral Fellowship (Best Third Year Paper) - Andrew Caplin, Anna Cororaton, Joseph Tracy (2017), Is the FHA Creating Sustainable Homeownership?, Real Estate Economics, 43 (4), pp. 957-992. Abstract
We produce first estimates of the sustainability of homeownership for recent Federal Housing Administration (FHA) borrowers. Unfortunately, the FHA does not produce its own statistics on sustainability. Neither does it permit researchers access to its data on internal refinances. This imposes significant barriers to entry for researchers who wish to track FHA borrower performance over time. We carefully construct the required tracking data to overcome this barrier. We forecast that no more than 75 percent of the 2007-2009 vintages of FHA borrowers will be able to successfully exit the FHA system. Our work raises questions about FHA’s role, its accounting and its accountability.
Teaching
Teaching Assistant, The Wharton School, University of Pennsylvania.
- Macroeconomics and the Global Economic Environment (MBA, Executive MBA), Prof. Andrew Abel and Prof. Stephen Meyer, 2015, 2016.
- International Banking (MBA, Undergrad), Prof. Richard J. Herring, 2015, 2016.
- Quantitative Methods in Macro-Finance (PhD), Prof. Joao Gomes, 2014, 2015.
- Investment Management (MBA, Undergrad) Prof. Robert Stambaugh and Prof. Donald Keim, 2014, 2015.
Author and Consultant, Monetary Policy Primer and Case Studies for High School Fed Challenge, Federal Reserve Bank of New York, 2016.