Bank Lending, Geographical Distance, and Credit risk: An Empirical Assessment of the Church Tower Principle

Kenneth Carling () and Sofia Lundberg ()
Additional contact information
Kenneth Carling : Department of Economics, Postal: Dalarna University, SE-781 88 Borlänge, Sweden

No 144, Working Paper Series from Sveriges Riksbank (Central Bank of Sweden)

Abstract: Does the Church Tower Principle, i.e. geographical proximity between borrowing firm and lending bank, matter in credit risk management? If so, the bank might expose itself to a greater risk by lending to distant firms and should therefore respond by rationing them harder. In this paper we incorporate the Church Tower Principle in a simple theoretical model and derive implications that are empirically testable. We use data on corporate loans granted 1994 to 2000 by a leading Swedish bank and find no evidence that the principle applies.

Keywords: Asymmetric information; credit rationing; duration model (search for similar items in EconPapers)
JEL-codes: D82 G21 (search for similar items in EconPapers)
Pages: 30 pages
Date: 2002-12-01
New Economics Papers: this item is included in nep-cfn, nep-ent, nep-mfd and nep-ure
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (8)

Published in Journal of Economics and Business, 2005, pages 39-59.

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