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Borrower–lender distance and loan default rates: Macro evidence from the Italian local markets

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  • Milani, Carlo

Abstract

I 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 Info

Article provided by Elsevier in its journal Journal of Economics and Business.

Volume (Year): 71 (2014)
Issue (Month): C ()
Pages: 1-21

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Handle: RePEc:eee:jebusi:v:71:y:2014:i:c:p:1-21

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Web page: http://www.elsevier.com/locate/jeconbus

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Keywords: Distance; Asymmetric information; Bank lending relationship; Bank lending technologies;

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