Borrower–lender distance and loan default rates: Macro evidence from the Italian local markets
AbstractI test the implications of borrower–lender physical and organizational distance for the loan default rate of Italian firms. I use a macro data set for the 1997–2011 period, which allows me to consider the effects of the international financial crisis too. I find that physical distance impedes information collection and monitoring and is inversely linked to credit quality. I also find that hard information can mitigate the adverse effects of physical distance on financing enterprises, showing the increasing importance of technological changes. Finally, I find evidence of the impact of organizational distance on default rates in less developed regions.
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Bibliographic InfoArticle provided by Elsevier in its journal Journal of Economics and Business.
Volume (Year): 71 (2014)
Issue (Month): C ()
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Web page: http://www.elsevier.com/locate/jeconbus
Distance; Asymmetric information; Bank lending relationship; Bank lending technologies;
Find related papers by JEL classification:
- G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
- D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
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