Essays in Financial Intermediation

Financial intermediaries have a special role in deposit and credit markets. This dissertation presents three essays exploring the relationship between banks, financial technology, deposits, and credit markets using the tools of academic finance. The first essay studies how financial technology reshapes competition among banks. I exploit quasi-random variation in the exposure to the introduction of Brazil's Pix, an instant payment system, and show that instant payments increase deposit market competition -- small bank deposits rise relative to large banks because Pix allows small banks to offer greater payment convenience to depositors. Since small banks become more competitive in the provision of payment services, they can reduce their deposit rates relative to large banks. Finally, I estimate a deposit demand model and find that depositors' welfare increases after Pix. These findings suggest that universally available payment systems can foster banking competition. The second essay provides evidence that the market power that global banks hold over domestic US deposits drives their operations abroad. After a contractionary monetary shock, global banks with high local deposit market power increase bank deposit spreads and experience outflows of domestic deposits. Since global banks have assets abroad, they increase flows from foreign branches to finance domestic lending but reduce lending abroad, thus cutting domestic lending less than local banks: a 1 p.p. US monetary shock leads to \$180 billion in flows from foreign branches to US offices. Our results demonstrate that the local deposit market power of global banks has significant repercussions on their international operations. The third essay studies cost and sources of debt for companies with poor ESG performance. We find that, while both loan and bond financing are costlier for borrowers with poor ESG performance, ``brown" firms face a lower extra premium for borrowing from banks than ``green" firms. In addition, companies with poorer ESG performance obtain larger bank loans and borrow smaller amounts from the public bond market, gradually shifting their debt structure towards more bank-loan-heavy. We discuss multiple explanations for our findings: brown borrowers' financial risk, banks' superior information about their borrowers, public debt holders' inherent preference for high ESG performance firms, and public debt holders being subject to stricter ESG regulation than banks.

Author dc:creator

• Sarkisyan, Sergey

Advisor dc:contributor.advisor

• Gomes, João

• Business

Language dc:language.iso

en

Repository record dc:identifier.uri

https://repository.upenn.edu/handle/20.500.14332/60063

OAI identifier oai:identifier

oai:repository.upenn.edu:20.500.14332/60063