Business Intelligence

Global Banking And Local Markets

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Executive Summary

In the early 1990s, a widely-shared opinion among scholars and practitioners was that the importance of physical proximity between banks and borrowers would be doomed to drastically decrease over time and, put in extreme terms, the end of banking geography would become a real possibility. However, the empirical evidence shows an unrelenting importance of local credit markets for small borrowers and local economic development. In the paper, the authors selectively review the literature on the real effects of bank consolidation and produce new evidence on the role of headquarter-to-branch functional distance on relationship lending.

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