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Branch Network Structure and Lending Behaviour

Tho Pham, Oleksandr Talavera and Andriy Tsapin

No 03/2018, Working Papers from National Bank of Ukraine

Abstract: This paper examines the link between branch network structure and bank lending. The unique dataset allows us to differentiate the structures of contact points which do not have decision-making authority and delegated branches which can affect loan decisions. We find that a large and dispersed network of contact points can help increase credit supply and mitigate risks through diversification. Further, banks benefit from information advantage brought by the dispersion of delegated branches. However, longer distance between headquarters and local delegations can also amplify agency problems, which outweigh the benefits. Our findings suggest that the optimal structure could be the centralized network of delegated branches combined with the diversified access point network.

Keywords: consolidation; centralization; decision-making; risk management; lending; access points; delegated branches (search for similar items in EconPapers)
JEL-codes: G01 G21 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-net, nep-rmg and nep-ure
Date: 2018-08
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