The 274th Wenlan Financial Forum

Abstract：

This paper examines the impact of railroads, on bank competition. We hypothesize that the expansion of railroads enhanced bank competition through two channels. The first hypothesis, which we call the “cost view,” assumes that the development of railroads reduces the costs that banks incur when they expand through branches. The other hypothesis is referred to as the “demand view,” which predicts that railroad construction creates new demand for financial service by facilitating trade in goods and labor mobility. To test the hypotheses, we hand-collected data on the expansion of railroad and bank branches in Modern China (1897-1936) and found that regional bank competition is positively associated with the density of local railroads or stations. Specifically, the mechanism analysis offers stronger support on the “demand view.” Our finding highlights the importance of transportation infrastructure in developing financial markets, especially for developing economies.

Speaker Introduction：

Professor Mei Wang holds a PhD in behavioral decision Theory from Carnegie Mellon University. He was a postdoctoral fellow at the University of Mannheim in Germany and an assistant professor at the Institute of Banking Research at the University of Zurich in Switzerland. He is currently Professor of Behavioral Finance at WHU-Otto Beisheim School of Management in Germany. His research interests include behavioral economy, cross-cultural comparison, risk perception, etc. Research papers have been published in journals such as Management Science, Quantitative Finance, Journal of Behavioral Finance, Journal of Risk and Uncertainty, Associate editor of Journal of Behavioral and Experimental Finance and Finance Research Letters, member of editorial board of Global Finance Journal, American Economic Review, Management Science, Journal of Banking and Finance, Review of Finance and other journal reviewers.