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Spillovers in Local Banking Markets

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  • Mark J. Garmaise
  • Gabriel Natividad

Abstract

How are neighboring firms affected when a bank learns more about a given firm? We analyze exchange-rate-induced movements of Peruvian firms across a threshold that governs their regulatory treatment by banks. Firms that cross the threshold supply more information to their banks and experience a substantial increase in financing. We find positive spillover effects: the neighbors of the above-threshold firms also experience increased financing. These spillovers are confined to neighbors sharing a bank, and the performance of new loans to these neighbors improves, suggesting that the bank has become better informed about other local firms.

Suggested Citation

  • Mark J. Garmaise & Gabriel Natividad, 2016. "Spillovers in Local Banking Markets," The Review of Corporate Finance Studies, Society for Financial Studies, vol. 5(2), pages 139-165.
    • Handle: RePEc:oup:rcorpf:v:5:y:2016:i:2:p:139-165.
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    File URL: http://hdl.handle.net/10.1093/rcfs/cfw005
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    Citations

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    Cited by:

    1. Liberti, José María & Seru, Amit & Vig, Vikrant, 2015. "Information, credit, and organization," IMFS Working Paper Series 97, Goethe University Frankfurt, Institute for Monetary and Financial Stability (IMFS).
    2. Fengjun Tian & Yang Yang & Lan Jiang, 2022. "Spatial spillover of transport improvement on tourism growth," Tourism Economics, , vol. 28(5), pages 1416-1432, August.
    3. Natividad, Gabriel, 2019. "Base tributaria y discontinuidades geopolíticas [Tax base and geopolitical discontinuities]," MPRA Paper 113169, University Library of Munich, Germany.
    4. Giuseppe Arcuri & Nadine Levratto & Marianna Succurro, 2023. "Does commercial court organisation affect firms’ bankruptcy rate? evidence from the french judicial reform," European Journal of Law and Economics, Springer, vol. 55(3), pages 573-601, June.
    5. Shanshan Guo & Wenchao Du & Shuqing Chen & Xitong Guo & Xiaofeng Ju, 2019. "Exploring the Impact of the Rational Antibiotic Use System on Hospital Performance: The Direct Effect and the Spillover Effect," IJERPH, MDPI, vol. 16(18), pages 1-13, September.
    6. Chongyu Wang & Jeffrey P. Cohen & John L. Glascock, 2019. "Geographic Proximity and Competition for Scarce Capital: Evidence from U.S. REITs," International Real Estate Review, Global Social Science Institute, vol. 22(4), pages 535-570.
    7. Jens Hagendorff & Nhan Le & Duc Duy Nguyen, 2022. "The Walls Have Ears: Local Information Environments and Corporate Fraud," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 54(8), pages 2377-2410, December.

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