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Financial Innovation, Organizations, and Small Business Lending

In: The Changing Geography of Banking and Finance

Author

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  • Gregory F. Udell

    (Indiana University)

Abstract

Technological innovation and changes in bank organizational structure have each had a significant effect on small business lending. Both of these phenomena have a spatial dimension. Technological innovation may allow banks to lend at a longer distance if it significantly diminishes the importance of direct customer contact. If consolidation produces fewer banking offices, then the average distance between borrowers and lenders will necessarily increase. The impact of these effects on small business lending, however, greatly depends on the extent to which hard information about borrower quality is a good substitute for soft information. This chapter assesses the theoretical and empirical evidence on the extent to which these changes will likely effect small business lending.

Suggested Citation

  • Gregory F. Udell, 2009. "Financial Innovation, Organizations, and Small Business Lending," Springer Books, in: Alberto Zazzaro & Michele Fratianni & Pietro Alessandrini (ed.), The Changing Geography of Banking and Finance, edition 1, chapter 0, pages 15-26, Springer.
    • Handle: RePEc:spr:sprchp:978-0-387-98078-2_2
    DOI: 10.1007/978-0-387-98078-2_2
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    Cited by:

    1. Franz Flögel & Marius Beckamp, 2020. "Will FinTech make regional banks superfluous for small firm finance? Observations from soft information‐based lending in Germany," Economic Notes, Banca Monte dei Paschi di Siena SpA, vol. 49(2), July.
    2. Knyazeva, Anzhela & Knyazeva, Diana, 2012. "Does being your bank’s neighbor matter?," Journal of Banking & Finance, Elsevier, vol. 36(4), pages 1194-1209.
    3. Christian Beer & Walter Waschiczek, 2017. "What is the financial sector’s contribution to the Austrian economy?," Monetary Policy & the Economy, Oesterreichische Nationalbank (Austrian Central Bank), issue Q2/17, pages 54-72.
    4. A. V. Mishura & S. D. Ageeva, 2020. "Providing Banking Branches in Russian Regions: Assessment of the Role of Distance and Other Factors," Regional Research of Russia, Springer, vol. 10(4), pages 506-512, October.
    5. Liu, Shuo & Migrow, Dimitri, 2022. "When does centralization undermine adaptation?," Journal of Economic Theory, Elsevier, vol. 205(C).

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