
Management Papers
Document Type
Journal Article
Date of this Version
11-2014
Publication Source
Management Science
Volume
60
Issue
11
Start Page
2776
Last Page
2793
DOI
10.1287/mnsc.2014.1944
Abstract
It is widely acknowledged that the 2007 mortgage crisis was preceded by a broad deterioration in underwriting diligence. This paper shows that this deterioration varied by the industry affiliation of mortgage lenders. Loans issued by homebuilders and stand-alone lenders were significantly less likely to default than loans issued by depository banks and affiliates of major financial institutions. I argue that homebuilders and stand-alone lenders had the least financial capacity to hold mortgages, and their resulting need to sell loans quickly on the secondary market forced them to issue safer loans. Tests of other explanations, including differences in information and incentives to avoid foreclosure externalities, receive little support. This study highlights a novel means by which firm boundaries influence firm adaptation to changing market conditions by defining the boundaries of the internal capital markets and hence the relative constraints of constituent units.
Copyright/Permission Statement
Originally published in Management Science © 2014 INFORMS
This is a pre-publication version. The final version is available at http://dx.doi.org/10.1287/mnsc.2014.1944
Keywords
corporate finance, financial institutions, banks, organization studies, strategy, industrial organization, firm objectives, organization and behavior, real estate
Recommended Citation
Gartenberg, C. M. (2014). Do Parents Matter? Effects of Lender Affiliation Through the Mortgage Boom and Bust. Management Science, 60 (11), 2776-2793. http://dx.doi.org/10.1287/mnsc.2014.1944
Included in
Business Administration, Management, and Operations Commons, Business and Corporate Communications Commons, Business Intelligence Commons, Corporate Finance Commons, Finance and Financial Management Commons, Management Information Systems Commons, Management Sciences and Quantitative Methods Commons, Organizational Behavior and Theory Commons, Strategic Management Policy Commons
Date Posted: 25 October 2018
This document has been peer reviewed.
Comments
At the time of this publication Dr. Gartenberg was affiliated with NYU, but she is now a faculty member at the University of Pennsylvania.