Borrower–lender distance and loan default rates: Macro evidence from the Italian local markets

Carlo Milani ()

Journal of Economics and Business, 2014, vol. 71, issue C, 21 pages

Abstract: I test the implications of borrower–lender physical and organizational distance for the loan default rate of Italian firms. I use a macro data set for the 1997–2011 period, which allows me to consider the effects of the international financial crisis too. I find that physical distance impedes information collection and monitoring and is inversely linked to credit quality. I also find that hard information can mitigate the adverse effects of physical distance on financing enterprises, showing the increasing importance of technological changes. Finally, I find evidence of the impact of organizational distance on default rates in less developed regions.

Keywords: Distance; Asymmetric information; Bank lending relationship; Bank lending technologies (search for similar items in EconPapers)
JEL-codes: D81 G21 (search for similar items in EconPapers)
Date: 2014
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Citations: View citations in EconPapers (8)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jebusi:v:71:y:2014:i:c:p:1-21

DOI: 10.1016/j.jeconbus.2013.09.002

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