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Do local differences in trust affect bank lending activities?

Author

Listed:
  • Jackowicz, Krzysztof
  • Kozłowski, Łukasz
  • Wnuczak, Paweł

Abstract

This study investigates the impact of local differences in trust on bank lending activities. Using a novel dataset of nearly 600 local Polish banks and their socioeconomic environments, we find that banks operating in regions with high-trust scores set lower loan interest rates and have lower labor-related costs compared to those operating in low-trust regions. Therefore, the empirical evidence suggests that local differences in trust influence not only bank-borrower relationships but also the human resources needed to gather and process credit information.

Suggested Citation

  • Jackowicz, Krzysztof & Kozłowski, Łukasz & Wnuczak, Paweł, 2024. "Do local differences in trust affect bank lending activities?," Finance Research Letters, Elsevier, vol. 61(C).
    • Handle: RePEc:eee:finlet:v:61:y:2024:i:c:s1544612324000345
    DOI: 10.1016/j.frl.2024.105004
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    More about this item

    Keywords

    Trust; Bank relationships; Lending; Bank costs; Loan costs;
    All these keywords.

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill

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