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Move a Little Closer? Information Sharing and the Spatial Clustering of Bank Branches

Author

Listed:
  • Shusen Qi

    (Xiamen University)

  • Ralph De Haas

    (European Bank for Reconstruction and Development and Tilburg University)

  • Steven Ongena

    (University of Zurich, Swiss Finance Institute, KU Leuven, and Centre for Economic Policy Research (CEPR))

  • Stefan Straetmans

    (Maastricht University and University of Antwerp)

  • Tamas Vadasz

    (KU Leuven)

Abstract

We present a model of credit market competition to derive key hypotheses about how information sharing between banks influences the spatial clustering of their branches. We then test these hypotheses using data on 56,555 branches owned by 614 banks across 19 countries. We find that information sharing incentivizes banks to establish branches in localities that are new to them but that are already served by other banks. The resultant branch clustering is associated with reduced spatial credit rationing, as information sharing enables firms to access credit from more distant banks. These findings underscore how information sharing makes it more important for banks to move closer to each other rather than closer to their borrowers.

Suggested Citation

  • Shusen Qi & Ralph De Haas & Steven Ongena & Stefan Straetmans & Tamas Vadasz, 2017. "Move a Little Closer? Information Sharing and the Spatial Clustering of Bank Branches," Swiss Finance Institute Research Paper Series 17-74, Swiss Finance Institute, revised Jun 2023.
    • Handle: RePEc:chf:rpseri:rp1774
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    Cited by:

    1. is not listed on IDEAS
    2. Petach, Luke & Weiler, Stephan & Conroy, Tessa, 2021. "It’s a wonderful loan: local financial composition, community banks, and economic resilience," Journal of Banking & Finance, Elsevier, vol. 126(C).
    3. Keil, Jan & Ongena, Steven, 2024. "The demise of branch banking – Technology, consolidation, bank fragility," Journal of Banking & Finance, Elsevier, vol. 158(C).

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    Keywords

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    JEL classification:

    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • R51 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Regional Government Analysis - - - Finance in Urban and Rural Economies

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