The special issue invites submissions of high quality theoretical and empirical research papers on topics related to the theme of banks and the real economy. There is a long established cross-country literature on this topic which suggests that the size and depth of the financial system has implications for the real economy by mobilizing savings, allocating resources to investment projects, exerting corporate control, facilitating risk management, and easing the exchange of goods and services. At a microeconomic level, prior evidence suggests that changes to the banking industry impacts real incomes and economic growth, corporations and small businesses, and households. The best of this research uses quasi-natural experiments, such as regulatory changes, to address the endogeneity concern of reverse causality from the real economy to the banking industry through the demand for financial services.
The extent to which banks benefit or hinder the real economy has been brought into sharp focus since the global financial crisis. Bank bailouts placed the finances of many governments into a parlous state, necessitating austerity programs, and raising questions regarding the size and complexity of banking organizations. The effects on the real economy were substantial with evidence suggesting that liquidity shortages affected the availability of funding and levels of corporate investment. Evidence suggests that bank bailouts during the global financial crisis did lead to favorable economic outcomes in terms of employment, as well as reduced business and personal bankruptcy. However, evidence on the influence of bailouts on the level and riskiness of lending and its impact on household and business behavior is somewhat limited. In particular, there is still a paucity of evidence on links between the banking sector and the real economy. Recent advances in econometrics, rich new datasets, and more active interventions by regulators in the banking system have opened up the possibility for more precise identification strategies to examine the impact of how shocks to individual bank balance sheets are transmitted to corporations, small businesses and households.
In the light of these developments, the proposed special issue of the Journal of Corporate Finance aims to provide a timely and comprehensive overview of the links between banks and the real economy. The contributions contained in the special issue are intended to engage and inform debates in academic and policy arenas. Submissions may address topics that include, but are not limited to:
- Bank capital regulation effects on lending and liquidity creation.
- Bank geographic deregulation impacts on corporations, small businesses, and households, and local economic outcomes.
- Bank bailouts and bail-ins and lending, innovation, and systemic risk.
- Bank credit and corporate management.
- Financial structure, corporate financing and real economic outcomes.
- Shocks to bank deposits and lending to corporations.
- Effects of banks on the corporate governance of their borrowers.
- Bank ownership, finance, and economic development.
- Bank lending and small business finance and entrepreneurship.
- Credit and savings behavior and growth / output.
- Bank behavior and inequality.
- The effects of relationship lending on real economic outcomes.
- Effects of bank branching decisions on local and regional economic conditions.