Communication within Banking Organizations and Small Business Lending. (20th March 2020)

• Record Type: Journal Article
• Authors: Levine, Ross; Lin, Chen; Peng, Qilin; Xie, Wensi
• Is Part Of: Review of financial studies. Volume 33:Number 12(2020)
• Page Start: 5750
• Page End: 5783
• Publication Date: 2020-03-20
• Subjects: G21 -- G30 -- D83 -- D20 -- D22; Finance -- United States -- Periodicals; Finance -- Periodicals; 332
• DOI: 10.1093/rfs/hhaa036
• Languages: English
• ISSNs: 0893-9454

Abstract

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.