The Effects of Dynamic Changes in Bank Competition on the Supply of Small Business Credit

We study the effects of structural changes in banking markets on the supply of credit to small businesses. Specifically, we examine whether bank mergers and acquisitions (M & As) and entry have ``external' effects on small business loans by other banks in the same local markets. The results suggest modest positive external effects from these dynamic changes in competition, except that large banks may reduce small business lending in reaction to entry. We confirm bank size and age as important determinants of this lending, and show that the measured age effect does not appear to be driven by local market M & A activity.     

Movers and Shuckers: Interdependent Prepayment Decisions

We model competing risks of mortgage termination where the borrower faces a repeated choice to continue to pay, refinance the loan, move or default. Most previous empirical work on mortgage prepayment has ignored the distinction between prepayments triggered by refinancing and moving, combining them into a single prepayment rate. We show that financial considerations are the primary drivers of the refinance choice while homeowner characteristics have more influence on the move decision. We demonstrate that these differences are statistically significant and that combining these two distinct choices into a single measure of prepayment shifts coefficients toward zero and produces inaccurate predictions of aggregate termination rates. For example, a combined model underestimates the effect of the market price of the loan on refinancing; it misses entirely the opposite effects of borrower income on moving and refinancing. Our results suggest that existing prepayment models are inconsistent predictors of mobility-driven prepayment and underestimate the effect of market conditions and borrower characteristics on refinancing and housing decisions. Our findings have great significance to mortgage investors because mobility-driven prepayments are likely to be a more significant source of prepayments in thenext decade.     

Urban Growth: A View from the Supply Side

Traditionally, models of urban growth have focused on demand factors. Housing has been the primary area of interest since it uses a great deal of land and thus is a major shaper of urban growth and structure. This emphasis on demand is sound in principle: consumer demand drives developer location and land using decisions, since developers' locational choices are derived from consumer preferences. This reasoning will pertain as long as developers can meet consumer preferences without difficulty. In actuality such preferences can only be met, within consumer budget constraints, by working within existing and often constraining institutional settings. This paper explores urban growth, from the supply side by examining residential developer location criteria as obtained from surveys. These behavioral findings are then used to obtain allocation functions for a simulation model. The allocation functions are based on the stated locational preferences of developers. The resulting simulation output is compared with actual growth in the Greater Vancouver Region of British Columbia for the period 1971–1975. The results are encouraging and point up areas where additional work is needed to better test the utility of the behavioral data in forecasting urban growth.     

A study of the impacts of zoning on housing values over time

Using a virtually unique data base for Vancouver, Canada, this study examines the ways in which various zoning classifications and land uses affect the sale prices of single-family residences over a 24-year period. The overwhelming conclusion is that while there are impacts, they are consistent in neither direction nor magnitude. The results suggest that the negative externalities that are generally assumed to exist may in fact not exist. As a result, the use of zoning to control the effects of such presumed externalities may not be justified.     

The virtue of human universals and cooperation: a review essay of Matt Ridley's The Origins of Virtue

In reviewing Matt Ridley's The Origins of Virtue we do five things. (1) We discuss and challenge the basic assumptions of the Standard Social Sciences Model which permeates management scholarship. (2) We present some alternatives to this model, particularly evolutionary psychology. (3) We look at how these alternatives provide a framework for understanding cooperation. (4) We enumerate some of the difficulties (both real and imaginary) with evolutionary psychology. (5) Finally, we suggest that management scholars work more closely with scholars from the many other disciplines that are developing solid theories of cooperation. © 1997 John Wiley & Sons, Ltd.     

Bank Risk Taking at the Onset of the Current Banking Crisis

We analyze bank governance, share ownership, CEO compensation, and bank risk taking in the period leading to the current banking crisis. Using a sample of large U.S. bank holding companies (BHCs), we find that BHCs with greater managerial control, achieved through various corporate governance mechanisms, take less risk. BHCs that pay CEOs high base salaries also take less risk, while BHCs that grant CEOs more in stock options or that pay CEOs higher bonuses take more risk. The evidence is generally consistent with BHC managers exhibiting greater risk aversion than outside shareholders, but with several factors affecting managers’ risk‐taking incentives.