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Communication within Banking Organizations and Small Business Lending

Author

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  • Ross Levine
  • Chen Lin
  • Qilin Peng
  • Wensi Xie

Abstract

We investigate how communication within banks affects small business lending. Using travel times between a bank’s headquarters and its branches to proxy for the costs of communicating soft information, we exploit shocks to these travel times—the introduction of new airline routes—to evaluate the impact of within-bank communication costs on small business loans. We find that reducing headquarters-branch travel time boosts small business lending in the branch’s county. Several extensions suggest that new airline routes facilitate in-person communications that boost small-firm lending.

Suggested Citation

  • Ross Levine & Chen Lin & Qilin Peng & Wensi Xie, 2020. "Communication within Banking Organizations and Small Business Lending," Review of Financial Studies, Society for Financial Studies, vol. 33(12), pages 5750-5783.
  • Handle: RePEc:oup:rfinst:v:33:y:2020:i:12:p:5750-5783.
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    More about this item

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G30 - Financial Economics - - Corporate Finance and Governance - - - General
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • D20 - Microeconomics - - Production and Organizations - - - General
    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis

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