Distance and Financial Connection: Dynamics in Private Firms’ Bank Loan Availability

Shao-Chieh Hsueh and Shuoxun Zhang

Emerging Markets Finance and Trade, 2024, vol. 60, issue 9, 2026-2047

Abstract: This study investigates the impact of borrower-lender distance on credit availability for private firms. Utilizing an extensive loan record history, we categorize loans into initial and subsequent borrowings. Our analysis reveals a consistent trend: loan size diminishes with increasing distance, even after accounting for Fintech effects. A noteworthy finding is the divergent role of financial connections. During initial borrowings, they mitigate the adverse effects of distance, while in subsequent borrowings, they become a positive signal to lenders, particularly post-soft information insights. These insights highlight intricate dynamics in credit availability, emphasizing the evolving roles of technology and financial connections in shaping lending relationships for private firms.

Date: 2024
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DOI: 10.1080/1540496X.2023.2298259

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