Banking geography, firm performance and the credit cycle

Daniela Bragoli, Chiara Burlina, Flavia Cortelezzi and Giovanni Marseguerra ()
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Giovanni Marseguerra: Università Cattolica del Sacro Cuore

No dime19_01, DiMSEFA - Quaderni del Dipartimento di Matematica per le Scienze Economiche, Finanziarie ed Attuariali from Università Cattolica del Sacro Cuore, Dipartimento di Matematica per le Scienze Economiche, Finanziarie ed Attuariali (DiMSEFA)

Abstract: This paper analyses the link between spatial developments in the banking sector and firm performance focusing on how this relation evolves during the credit boom and bust which precedes and follows the 2008 crisis. Using a dataset of Italian manufacturing firms and banks at the province level from 2006 to 2011, we show that geographical proximity (within banks and between banks and borrowers) matters for firm performance, but has a different impact during credit booms and busts. What matters the most for increasing firm performance, during the credit boom, is a short distance between the control centre of lending decision and the local branches (functional distance), whereas during the credit crunch, only the operational proximity of banks to borrowers becomes an important driver to increase firm performance.

Keywords: banking geography; operational proximity; functional distance; firm performance; credit cycle. (search for similar items in EconPapers)
JEL-codes: L6 P16 R11 (search for similar items in EconPapers)
Pages: 34
Date: 2019-01
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