Vahid Saadi, Ph.D.
Assistant Professor of Finance - IE Business School
Research Affiliate - Halle Institute for Economic Research (IWH)
Research interests: Empirical Banking, Financial Intermediation, Real Estate, Microeconometrics
Role of the Community Reinvestment Act in Mortgage Supply and the U.S. Housing Boom, The Review of Financial Studies, 2020, 33(11), 5288-5332.
Abstract: This paper studies the role of the Community Reinvestment Act (CRA) in the U.S. housing boom-bust cycle. I find that enhanced CRA enforcement in 1998 increased the growth rate of mortgage lending by CRA-regulated banks to CRA eligible census tracts. I show that during the boom period house price growth was higher in the eligible census tracts because of the shift in mortgage supply of regulated banks. Consequently, these census tracts experienced a worse housing bust. I find that CRA-induced mortgages were awarded to borrowers with lower FICO scores and were more frequently delinquent.
Presented at: AFA 2017; Amsterdam Business School (2017); University of Bonn (2017); Deutsche Bundesbank (2017); Universidad Carlos III de Madrid (2017); IE Business School (2017); Norwegian School of Economics NHH (2017); Lancaster University Management School (2017); Bank of England (2017); University of Ulm (2016); IWH-Halle (2016); Otto-von Guericke University of Magdeburg (2016)
Public Bank Guarantees and Allocative Efficiency, with Reint Gropp and Andre Guettler, Journal of Monetary Economics, 2020, 116, 53-69.
Abstract: We use a natural experiment and matched bank/firm data to identify the effects of bank guarantees on allocative efficiency. We find that with guarantees in place unproductive firms invest more and maintain higher rates of sales growth. Moreover, firms produce less productively. Firms also survive longer in banks’ portfolios and those that enter guaranteed banks’ portfolios are less productive. Finally, we observe fewer economy-wide firm exits and bankruptcy filings in the presence of guarantees. Overall, the results are consistent with the idea that guaranteed banks keep unproductive firms in business for too long and prevent their exit from the market.
Presented at: FIRS 2016*; ASSA Day Ahead (San Francisco Fed, 2016)*; MFA 2016; EBC (Tilburg University, 2015); EFA 2015*; SGF 2015*; BoE, BHC, CEPR and CFM Workshop on Finance, Investment and Productivity (Bank of England, 2016); CFIC (DePaul University, 2017)*; 25th Finance Forum (UPF, 2017); MIT Golub Center for Finance and Policy 4th Annual Conference (2017)*; [* presented by co-authors]
The Cleansing Effect of Banking Crises, with Reint Gropp, Steven Ongena, and Jörg Rocholl, 2020, CEPR Discussion Paper No. DP15025
Abstract: We assess the cleansing effects of the recent banking crisis. In U.S. regions with higher levels of supervisory forbearance on distressed banks during the crisis, there is less restructuring in the real sector and the banking sector remains less healthy for several years after the crisis. Regions with less supervisory forbearance experience higher productivity growth after the crisis with more firm entries, job creation, and employment, wages, patents, and output growth. Supervisory forbearance is greater for state-chartered banks and in regions with weaker banking competition and more independent banks, while recapitalization of distressed banks through TARP does not facilitate cleansing.
Presented at: Arne Ryde Conference on Financial Intermediation (Lund University, 2017)*; Joint BIS-IMF-OECD conference co-sponsored by the Global Forum on Productivity (OECD, 2018); The Real Effects of Financial Crises: Past, Present, Future (Bundesbank, 2018)*; CFIC (DePaul University, 2018)*; 1st Biennial Bank of Italy and Bocconi University conference on Financial stability and Regulation (Banca d'Italia, 2018); 26th Finance Forum (Santander, 2018); FDIC/JFSR Bank Research Conference (FDIC, 2018)*; III Madrid Barcelona Workshop on Banking and Corporate Finance (CEMFI, 2018); 6th Emerging Scholars in Banking and Finance Conference (Cass Business School, 2018); The First Finance and Productivity Conference (EBRD, Dec. 2019) [* presented by co-authors]
Work in Progress
On Non-Performing Loans, with Sergio Mayordomo, Omar Rachedi, and María Rodríguez-Moreno
Electoral Lending Cycles: The Case of German Savings Banks, with Reint Gropp
The Pope, Martin Luther and Banking Behavior: Does Local Denomination Affect Bank Risk Taking?, with Konstantin Kiesel