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Cultural Proximity and the Formation of Lending Relationships

Antonio Accetturo (), Giorgia Barboni, Michele Cascarano () and Emilia Garcia-Appendini ()
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Giorgia Barboni: University of Warwick, Warwick Business School and CAGE

CAGE Online Working Paper Series from Competitive Advantage in the Global Economy (CAGE)

Abstract: We use credit registry data from the population of loans granted to firms in a region hosting two different cultural groups to study the role of culture in the formation of lending relationships. We find a large predominance of lending relationships involving banks and firms of the same culture, particularly among small, young, and opaque firms. Loans to same-culture firms are larger, require less collateral, and default less often than loans to different-culture firms. Our results suggest that cultural proximity reduces information asymmetries by providing a source of soft information that complements the one stemming from close or lengthy relationships.

Keywords: Cultural proximity; Asymmetric information; Soft information; Lending relationships JEL Classification: G21, G30, Z1 (search for similar items in EconPapers)
Date: 2020
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https://warwick.ac.uk/fac/soc/economics/research/c ... tions/wp514.2020.pdf

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