We study how deposit competition affects a bank's decision to securitize mortgages. Exploiting the state-specific removal of deposit market caps across the U.S. as a source of competition, we find a 7.1 percentage point increase in the probability that banks securitize mortgage loans. This result is driven by an 11 basis point increase in deposit costs and corresponding reductions in banks' deposit holdings. Our results are strongest among banks that rely more on deposit funding. These findings highlight a hitherto undocumented and unintended regulatory cause that motivates banks to adopt the originate-to-distribute model.

We investigate how a state's political corruption affects a resident firm's debt contracting and how a change in anti-corruption regulation alters the relation between corruption and loan contracting. Firms in more corrupt states are associated with significantly higher loan spreads and tighter loan covenants than firms in less corrupt states. Furthermore, the passage of the Dodd–Frank whistleblowing provision amplifies the conhcerns of banks about the detrimental impact of corruption due to the increased exposure of firms to whistleblowing threats. The detrimental impact of corruption is further amplified when a state has a higher level of whistleblowing involvement, when firms are located in more corrupt states or closer to the SEC office, and when the bank's state is less corrupt than the firm's state. In general, we document the externality of corruption in the debt financing of firms and the response of banks to changes in regulation.

We investigate whether lenders employ sustainability pricing provisions to manage borrowers’ environmental risk. Using unexpected negative environmental incidents of borrowers as exogenous shocks that reveal information on environmental risk, we find that lenders manage borrowers’ environmental risk by conventional tools such as imposing higher interest rates, utilizing financial and net worth covenants, showing reluctance to refinance, and demanding increased collateral. In contrast, the inclusion of sustainability pricing provisions in loan agreements for high environmental risk borrowers is reduced by 11 percentage points. Our study suggests that sustainability pricing provisions may not primarily serve as risk management tools but rather as instruments to attract demand from institutional investors and facilitate secondary market transactions.