Premium
THE IMPACT OF REAL ESTATE LENDING ON THRIFTS' FRANCHISE VALUES DURING THE 2007–2009 CRISIS: A COMPARISON WITH COMMERCIAL BANKS
Author(s) -
Salotti Valentina,
Schenck Natalya A.,
Thornton John H.
Publication year - 2016
Publication title -
journal of financial research
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.319
H-Index - 49
eISSN - 1475-6803
pISSN - 0270-2592
DOI - 10.1111/jfir.12089
Subject(s) - franchise , real estate , business , diversification (marketing strategy) , loan , charter , financial crisis , portfolio , finance , financial system , monetary economics , economics , business administration , macroeconomics , archaeology , marketing , history
The real estate bubble and 2007–2009 financial crisis revived the debate about the viability of the thrift charter and its imposed limits on lending diversification. We compare the impact of real estate exposure on franchise values of publicly traded thrifts and size‐matched banks during and after the crisis. Whereas thrifts are mostly exposed to residential real estate, banks have a higher concentration in commercial real estate (CRE), which is significantly associated with the decline in their franchise values. We conclude that the constraints on loan portfolio diversification, such as the one on CRE, are not detrimental to the thrift charter.