Senior Lecturer in Finance - University of Liverpool
Research Affiliate - Halle Institute for Economic Research (IWH)
Contact: vahid.saadi@liverpool.ac.uk
Research interests: Empirical Banking and Real Estate Finance
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.
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.
Public Bank Guarantees and Allocative Efficiency, with Reint Gropp and Andre Guettler, Journal of Monetary Economics, 2020, 116, 53-69.
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.
The Cleansing Effect of Banking Crises, with Reint Gropp, Steven Ongena, and Jörg Rocholl, Economic Inquiry, 2022, 1-28
We assess the cleansing effects of the 2008-2009 financial crisis. U.S. regions with higher levels of supervisory forbearance on distressed banks see less restructuring in the real sector: fewer establishments, firms, and jobs are lost when more distressed banks remain in business. In these regions, the banking sector has been less healthy for several years after the crisis. Regions with less forbearance experience higher productivity growth after the crisis with more firm entries, job creation, and employment, wages, patents, and output growth. Forbearance is greater for state-chartered banks and in regions with weaker banking competition and more independent banks.
Banking Market Structure and Trade Shocks, with Mohammad Izadi, Journal of Banking and Finance, 2023, (152) 106884
The structure of the local banking market, characterized by bank specialization and bank concentration, can affect credit and labor market responses to an import shock to the local economy. During the surge in U.S. imports from China from 1998 to 2006, small business loans (SBL) decline in counties that face a larger import shock. Bank geographical specialization positively affects banks' SBL origination in response to the import shock. Consistent with these results, average employment declines in counties hit by the import shock, while higher bank specialization attenuates this negative labor outcome. Furthermore, in the face of import competition, credit support by specialized banks helps small businesses to respond to the heightened competition through firm innovation. We find little evidence for such stabilizing effects for bank concentration.
Bank Municipal Bond Holdings and Mortgage Lending Standards, with Omar Rachedi, Journal of Corporate Finance, 2026, 102968
We provide evidence that the geographical segmentation of the municipal bond market - induced by state tax exemptions - leads banks to diversify their mortgage lending across states. Municipal bond holdings expose banks to local real-estate risk: these securities are largely backed by property-tax revenues with high elasticity to house prices. Consistent with a diversification motive, the effect is stronger for banks with weaker balance sheets, for those whose mortgage lending is highly concentrated in their home state, and toward areas whose housing markets are less correlated with those of the home state. Interestingly, this out-of-state expansion is accompanied by a relaxation of lending standards, as banks approve mortgages with lower FICO scores and higher debt-to-income ratios, which subsequently results in more non-performing loans. The relaxation of lending standards emerges in states where banks lack branch presence and in highly competitive markets, where expanding requires attracting borrowers through looser screening. Diversification thus may generate risk-taking as a by-product.
Import Competition and Bank Portfolio Rebalancing, 2023, Reject and Resubmit at the Review of Finance
This paper shows that the rise in import competition from China during the period from 1999 to 2006 resulted in a rebalancing of U.S. bank loan portfolios from business to mortgage credit. Banks with a larger exposure increase mortgage origination, move from more- to less-exposed counties, and increase risk-taking by moving to areas with no lending history. Lower mortgage securitization activity and relatively faster growth of real estate loans on bank balance sheets confirm a rebalancing of bank credit portfolios towards real estate loans for banks with a larger exposure to the rise in imports from China.
Christian Moralities and Banking Behavior: Does Local Denomination Affect Bank Risk Taking, with Konstantin Kiesel, 2018
Electoral Lending: The Case of German Savings Banks, with Reint Gropp, 2017
The German Saver and the Low Policy Rate Environment, with Reint Gropp, IWH Online 9/2015
Electoral Credit Supply Cycles among German Savings Banks, with Reint Gropp, IWH Online 11/2015
Press: Spiegel, Handelsblatt, FAZ, Die Welt