Bank Lending in the Knowledge Economy

RePEc Short ID: pra518
ORCID iD: 0000-0002-5319-2013

Dell'Ariccia, Giovanni; Kadyrzhanova, Dalida; Minoiu, Camelia; Ratnovski, Lev

doi:10.17016/FEDS.2020.040

Working Paper

Bank Lending in the Knowledge Economy

Abstract: We study the composition of bank loan portfolios during the transition of the real sector to a knowledge economy where firms increasingly use intangible capital. Exploiting heterogeneity in bank exposure to the compositional shift from tangible to intangible capital, we show that exposed banks curtail commercial lending and reallocate lending to other assets, such as mortgages. We estimate that the substantial growth in intangible capital since the mid-1980s explains around 30% of the secular decline in the share of commercial lending in banks' loan portfolios. We provide suggestive evidence that this reallocation increased the riskiness of banks' mortgage lending.

Keywords: Bank lending; Corporate intangible capital; Real estate loans; Commercial loans;

JEL Classification: E22; E44; G21;

https://doi.org/10.17016/FEDS.2020.040