# Research

Working Paper
Chenzi Xu and He Yang. Working Paper. “National Banks and the Local Economy”. PDFAbstract

This paper studies how banks impact the local economy and in particular examines their role in providing monetary services through stable liabilities. We study the United States National Banking Act of 1864 that passed during a period when the circulating money supply primarily consisted of privately issued bank notes. The Act required national banks'' to guarantee bank note liabilities with federal bonds, thereby creating a new and stable currency, reducing transactions costs and facilitating exchange. National banks also faced regulatory capital requirements that varied by town population. Using the jump in the capital requirement as an instrument for national bank entry, we find that the composition of agricultural production shifted from non-traded crops to traded crops while total production was unaffected. Moreover, trade activity proxied by employment in trade-related professions grew. National banks also led to significant manufacturing output growth that was primarily driven by inputs use, and these changes can be attributed to national banks' role in providing short-term credit and reducing transactions costs in trade. Furthermore, the higher levels of manufacturing output persisted for two decades.

He Yang JMP

He Yang. Working Paper. “Regional Economic Growth and Firm Performance”. PDFAbstract

Changes in local economic conditions can have important impacts on the performance and investment decisions of firms operating there. The spatial distribution of firms' current assets can therefore be a determinant of overall firm outcomes. I use a sample of 285 publicly traded retail, restaurant, hotel, and entertainment service chains from 1997 to 2016 to study the effect of quarterly state-level income growth on firms, exploring variation in the geographic location of stores. I find that firms with more stores in high-growth states have higher sales growth contemporaneously and higher predictable stock returns subsequently. In addition, firm expansion is positively associated with past state-level income growth. While higher investment sensitivity to positive past local income growth does not lead to higher future revenue growth, it is associated with a small increase in profitability. The results suggest that regional economic conditions are important for firm performance, but are under-weighted by investors and managers.