Do Banks Price Discriminate Spatially? Evidence from Small Business Lending in Local Credit Markets

Andrea Bellucci, Alexander Borisov () and Alberto Zazzaro ()
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Alexander Borisov: University of Cincinnati

No 1303, Working Papers CASMEF from Dipartimento di Economia e Finanza, LUISS Guido Carli

Abstract: In this paper we explore the effects of bank-borrower physical proximity on price and non-price aspects of small business lending in local credit markets. Along the price dimension, our analysis reveals that interest rates increase with bank-borrower distance and decrease with the distance between borrower and other competing banks. Along the quantity dimension, we observe that more distant borrowers are more likely to experience binding credit limits. We also show that the quantity effects of bank-borrower distance are concentrated among less transparent firms. Our findings are consistent with pricing based on marginal costs that reflect information-based factors, and are in contrast to the established paradigm, where banks adopt spatial discriminatory pricing rules when lending to small-sized enterprises.

Keywords: Distance; Bank lending; Pricing; Interest rate; Credit availability. (search for similar items in EconPapers)
JEL-codes: G21 G32 L11 (search for similar items in EconPapers)
Date: 2013
New Economics Papers: this item is included in nep-ban, nep-ent, nep-ind and nep-ure
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (56)

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Related works:
Journal Article: Do banks price discriminate spatially? Evidence from small business lending in local credit markets (2013)
Working Paper: Do Banks Price Discriminate Spatially? Evidence from Small Business Lending in Local Credit Markets (2013)
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Persistent link: https://EconPapers.repec.org/RePEc:lui:casmef:1303

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