Generalists and Specialists in the Credit Market

Fricke, Daniel and Roukny, Tarik (2016) Generalists and Specialists in the Credit Market. Said Business School Working Paper 2016-11.

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In this paper, we explore the cross-section of Japanese banks’ industrial loan portfolios over the last 34 years. We show that banks with diversified lending (generalists) and banks with focused lending (specialists) coexist. Similarly, industries with diversified borrowing (generalists) and industries with focused borrowing (specialists) also coexist. Interestingly, specialist banks and specialist industries rarely interact, suggesting significant overlap in banks’ loan portfolios. We introduce a model to describe these interaction patterns and identify a persistent and economically meaningful set of generalist banks/industries. We find that size is an important determinant for being a generalist. Finally, we show that generalist banks tend to be less vulnerable compared to specialist banks.

Item Type: Oxford Saïd Research Paper
Keywords: Finance, networks, bank lending, portfolio theory, fire sales, contagion, diversification, systemic risk
Subject(s): Finance
Centre: CABDyN Complexity Centre
Date Deposited: 25 Apr 2016 10:05
Last Modified: 03 Jun 2016 14:30

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