Communication within Banking Organizations and Small Business Lending

Ross Levine; Chen Lin; Qilin Peng; Wensi Xie

doi:10.1093/rfs/hhaa036

Review of Financial Studies Vol. 33 No. 12 2020

Communication within Banking Organizations and Small Business Lending

Ross Levine¹; Chen Lin²; Qilin Peng²; Wensi Xie³

¹ Haas School of Business, University of California, Berkeley · ² Faculty of Business and Economics, The University of Hong Kong , · ³ CUHK Business School, Chinese University of Hong Kong

open access

Abstract

We investigate how communication within banks affects small business lending. Using travel times between a bank’s headquarters and its branches to proxy for the costs of communicating soft information, we exploit shocks to these travel times—the introduction of new airline routes—to evaluate the impact of within-bank communication costs on small business loans. We find that reducing headquarters-branch travel time boosts small business lending in the branch’s county. Several extensions suggest that new airline routes facilitate in-person communications that boost small-firm lending.

DOI: 10.1093/rfs/hhaa036
Volume: 33
Issue: 12
Pages: 5750-5783
Language: en
Sources: bibtex:phds-export.bib openalex crossref

Communication within Banking Organizations and Small Business Lending

Abstract

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