Financial Intermediation

WORKING PAPERS

Deposit and Credit Reallocation in a Banking Panic: The Role of State-Owned Banks

Authored by Viral V. Acharya, Abhiman Das, Nirupama Kulkarni, Prachi Mishra, and Nagpurnanand Prabhala

Anatomy

Coauthors (Viral Acharya, Abhiman Das, Nirupama Kulkarni, Prachi Mishra)

October 5, 2023 

In a bank run episode in India, private bank branches experience sudden and considerable loss of deposits, which migrate to state-owned public sector banks (PSBs). Using branch and firm-bank data, the paper shows that the flight to safety is not a flight to quality. Lending shrinks and credit quality improves at the run banks but worsens at the banks receiving flows, resulting in worse aggregate outcomes. 

Available at https://ssrn.com/abstract=4241013

Bank Accounts For The Unbanked: Evidence from a Big Bang Experiment

Authored by Yakshup Chopra, Nagpurnanand Prabhala, and Prasanna Tantri

PMJDY

August 13, 2023

The PMJDY is a “big bang” intervention in India that aimed to eliminate financial exclusion in one shot by giving bank accounts to all its unbanked. The paper shows that although the new account recipients are poor, unfamiliar with banking, and have a long history of exclusion from banking, there is significant uptake, usage, and balance accumulation in the new PMJDY accounts. These accounts are used to hedge against local shocks, showing that bank accounts help in household risk management. 

Available at https://ssrn.com/abstract=2919091  

On Small Bank Financing and Funding Hesitancy in Crises: Evidence from the Paycheck Protection Program

(coauthors: Tetyana Balyuk and Manju Puri). 

BalyukPrabhalaPuri

September 6, 2021

The paycheck protection program was a supply-side shock of unprecedented scale in which banks had to disburse $669 billion within weeks to 5.2 million small businesses. The paper finds that small banks responded more promptly. Small banks were less likely to prioritize large clients over small ones, especially clients with prior small bank relationships. 

Available at SSRN: https://ssrn.com/abstract=3717259  

Monetary Policy Transmission Within Banks: Evidence from India

DasMishraPrabhala

(coauthors: Abhiman Das, Prachi Mishra).

The Indian central bank periodically injects liquidity into or withdraws liquidity from the banking system by adjusting the cash reserve ratio. Using branch-level data, the paper finds that these HQ-level funding shocks are transmitted into bank lending and deposit-taking activities in asymmetric ways across individual branches.

(contact me for copy)

PUBLISHED PAPERS

The Relationship Dilemma: Why Do Banks Differ in the Pace at Which They Adopt New Technology?

Authored by Prachi Mishra, Nagpurnanand Prabhala, and Raghuram G. Rajan

MishraPrabhalaRajan

The Review of Financial Studies 35 (2022) 3418–3466

© The Author(s) 2021. Published by Oxford University Press on behalf of The Society for Financial Studies.

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New tech or practices are often beneficial to businesses. Why then are some institutions slow to adopt them? Stickiness – habits -- created by past practices inhibit the adoption of better ones today. 

Venture Capital Communities

Authored by Amit Bubna, Sanjiv R. Das, and Nagpurnanand Prabhala

BubnaDasPrabhala

JOURNAL OF FINANCIAL AND QUANTITATIVE ANALYSIS Vol. 55, No. 2, Mar. 2020, pp. 621–651

COPYRIGHT 2019, MICHAEL G. FOSTER SCHOOL OF BUSINESS, UNIVERSITY OF WASHINGTON, SEATTLE, WA 98195

doi:10.1017/S002210901900005X

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Using computational methods from the physical sciences, we show that VCs self-organize into “communities,” or non-exclusionary groups with fuzzy boundaries. The three communities in the data are roughly ordered by their age and reach, with members similar to each other in age, connectedness, and functional style. Firms funded by community VCs exit faster and have more innovation, especially when they are early-stage firms without an innovation history.

Mutual Fund Competition, Managerial Skill, and Alpha Persistence

Authored by Gerard Hoberg, Nitin Kumar, and Nagpurnanand Prabhala

HobergPrabhalaKumar1

The Review of Financial Studies , May 2018, Vol. 31, No. 5 (May 2018), pp. 1896-

1929

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The paper proposes a new measure of competition faced by funds, one that is fund-specific, dynamic, and intransitive. Skill, or alpha, is a fund’s return relative to that of its competitors. We show that alpha is high when funds face less competition. Alpha persists for up to four quarters.

IPOs With and Without Allocation Discretion: Empirical Evidence

Authored by Amit Bubna and Nagpurnanand R. Prabhala

BubnaPrabhala

2010 Elsevier Inc. All rights reserved.

A. Bubna, N.R. Prabhala / J. Finan. Intermediation 20 (2011) 530–561

Proprietary data show that underwriter control of IPO share allocations is associated with less underpricing. Allocation powers are used extensively: identical bids can receive significantly different allocations depending on bidder identity. Giving underwriters allocation powers appears to assist in pre-market price discovery.

Institutional Allocation in Initial Public Offerings: Empirical Evidence

Authored by Reena Aggarwal, Nagpurnanand R. Prabhala, and Manju Puri

AggarwalPrabhalaPuri

THE JOURNAL OF FINANCE VOL. LVII, NO. 3 JUNE 2002

Underwriters controlling IPO allocations in the U.S. give more shares in IPOs to institutions when there is strong pre-market demand. Institutional allocation predicts day 1 IPO returns beyond other publicly available data.