Distance, Lending Relationships, and Competition

2005/01/08 by HANS DEGRYSE, Hans Degryse, STEVEN ONGENA +1 · 8 citations
Economics, Econometrics and Finance · Business, Management and Accounting · #Banking stability, regulation, efficiency #Housing Market and Economics #Corporate Finance and Governance

paper · doi:10.1111/j.1540-6261.2005.00729.x

Abstract

ABSTRACT We study the effect on loan conditions of geographical distance between firms, the lending bank, and all other banks in the vicinity. For our study, we employ detailed contract information from more than 15,000 bank loans to small firms comprising the entire loan portfolio of a large Belgian bank. We report the first comprehensive evidence on the occurrence of spatial price discrimination in bank lending. Loan rates decrease with the distance between the firm and the lending bank and increase with the distance between the firm and competing banks. Transportation costs cause the spatial price discrimination we observe.

Citations

• Collateral and Rationing: Sorting Equilibria in Monopolistic and Competitive Credit Markets
• Specification Tests in Econometrics
• Stability in Competition

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