Lending organization and credit supply during the 2008-09 crisis

Using a dataset that combines bank organizational variables with information on firms’ credit demand and balance-sheet indicators, we investigate the impact of how bank lending was organized on credit dynamics during the 2008-09 financial crisis. Our main findings suggest that the organization of lending to non-financial firms had an impact on the ability of banks to expand credit. Those that made substantial use of credit scoring techniques actually moderated the pace of credit growth during the economic downturn. At the same time, banks that delegated more power to branch managers were likely to expand lending at a faster rate. Finally, contrary to the evidence from the pre-crisis period, we find that lengthy branch manager tenure in the same branch was detrimental to the rate of credit growth. These findings are robust to a broad set of robustness checks.