Explaining differences in farm lending among banks
Do small, rural banks lend to farmers because they are small, or because they are rural? This paper combines a new measure of the extent of agricultural activity in banking markets with an appropriate statistical framework to examine causes of interbank variation in agricultural production loans. The results show that a bank's size and head office location both matter to some extent, but that the size of a bank's branches in agricultural areas is the single most important factor determining agricultural loan levels. Other variables, such as ownership structure and charter type, have no significant effects. While far from definitive, the results suggest that industry consolidation and mergers may have little effect on agricultural credit, as long as they do not lead to the outright closure of branches in rural areas.
Volume (Year): (1996)
Issue (Month): ()
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