Allen N. Berger’s research while affiliated with University of South Carolina and other places

We study the broad question about the sources of FinTech lending growth by examining a specific representative product for which the technologies of both FinTech and the incumbent competitors can be identified and compared—small business lending. We test whether the presence of incumbents employing different technologies affects FinTech penetration, and find more FinTech lending where large/out-of-market banks are more prevalent. Using stress test exposures and Community Reinvestment Act examinations as instruments, we find that FinTech credit more often substitutes for loans by large/out-of-market banks than small/in-market banks. Results are consistent with FinTech advantages in processing hard information, rather than hardening soft information. (JEL G21, G23, O33)

Bank bailouts are not “one-shot” events, as often portrayed, but rather dynamic processes with phases over time. Regulators “catch” financially distressed banks and provide aid, “restrict” these banks’ activities for ex ante unknown lengths of time, and then “release” the banks from the restrictions when capital ratios reach sufficiently healthy levels. This catch-restrict-release bailout approach is employed globally and applies to both major bailout methods capital injections (CIs) and debt guarantees (DGs). We model how a regulator that maximizes a social welfare function that includes the value of the bank and expected costs to the rest of the financial system and the real economy of its default might design and implement catch-restrict-release and test model predictions. Our data laboratory includes multiple EU nations over the financially stressful 2008-2014 period when many bailouts occurred. Findings suggest regulators bail out banks in a qualitatively consistent fashion with maximizing the social welfare function, yielding policy implications and directions for future research. (JEL G01, G21, G28, H81)

We present a life cycle view of systemic risk and crises that incorporates and synthesizes a number of views and organizes the theoretical and empirical research evidence in a clear fashion. We illustrate how systemic risks build during the boom, are realized during the following crisis, and are well addressed or not in the aftermath, which helps determine how well or poorly the following cycle will likely evolve. We aim to improve current understanding of systemic risk and crises, the roles of the different economic segments of society, highlight key issues of measurement, and provide guidance for future academic research and policy analysis. We address several controversies—the outsized role of the banking sector in creating and resolving systemic risks, its exclusive role in systemic risk measurement, and seemingly irrational behavior in which the same or similar costly mistakes are repeated every cycle.

We study profit and cost efficiency effects of the Paycheck Protection Program (PPP) for US banks that disbursed the funds. Using bank‐level data combined with PPP bailout data and instrumental variables and other techniques for identification, our findings suggest that more intense PPP lending boosted bank profit efficiency but decreased cost efficiency. We uncover channels for profit efficiency improvements through higher revenues from core deposits and lending, and a labour‐related channel for the decline in bank cost efficiency from hiring more employees and significantly increasing compensation expenses. Findings are robust to many checks and may have important implications for bank management and future government bailout policy design.

Universal banking powers are permissions for a nation’s banks to provide financial services beyond “plain vanilla” banking activities. Some nations restrict banking activities to only services such as loans and deposits, while others permit commercial banks to also engage in investment banking, insurance underwriting, and/or real estate investment activities. Despite the research and policy importance of this issue, the literature essentially neglects how these powers affect the primary role of banks in creating liquidity for society. We formulate two competing hypotheses as to whether more universal banking powers increase versus decrease domestic bank liquidity creation based on theories of risk absorption, relationship banking, and scope economies/diseconomies. We test which hypothesis empirically dominates using data from 85 nations over 15 years. The data strongly support the hypothesis that universal powers boost domestic bank liquidity creation. These findings are robust to addressing endogeneity, controlling for bank regulations, macroeconomic conditions, and institutional variables, and conducting subsample analyses. We also test for international arbitrage – whether the foreign subsidiaries of banks from more restrictive countries create more liquidity in host countries with fewer restrictions – and find support for this arbitrage. Collectively, these results provide important research and policy implications.

We analyze how bank sentiment affects bank liquidity hoarding, distinguishing unexplained beliefs of bank managers from fundamental‐based beliefs. We build a bank management sentiment measure from textual analysis of 10‐Ks and utilize a comprehensive bank liquidity hoarding measure. We find that negative bank sentiment increases liquidity hoarding not warranted by a bank's fundamental conditions or external circumstances. Further analysis confirms that our findings reflect bank volition rather than being driven solely by borrowers or depositors. We address endogeneity concerns using exogenous weather conditions as instruments. Overall, our findings suggest that bank sentiment can influence how much liquidity banks provide to the economy and financial system.