By integrating the staggered interstate bank deregulation into a gravity model following Goetz, Laeven, and Levine (2013, 2016), we construct a time-varying bank-specific instrument for geographic diversification and investigate its causal effect on corporate innovation via the lending channel....

In this study, we investigate the relationship between various dimensions of diversification and the cost of debt for publicly traded bank holding companies (BHCs). We find that both domestic geographic diversification of deposits and diversification of assets lead to a lower bond yield-spread....