Keep Walking? Geographical Proximity, Religion, and Relationship Banking
39 Pages Posted: 25 Jul 2015 Last revised: 13 Dec 2017
Date Written: December 12, 2017
We investigate the geographical proximity of firms to their relationship banks. We find that Islamic, foreign and state banks are more and large banks less remote to their borrowers. We also find that the probability for a firm to connect to a bank substantially decreases in distance, but that the choice along bank characteristics determines how potent distance is in its impact. If the bank in the vicinity is an Islamic bank, distance plays a more muted role, especially in cities with a high conservative party vote and higher trust in religious institutions. When engaging with small, foreign or state banks physical distance no longer plays a crucial role in determining the firms` choices. Overall, these findings suggest that the presence of banks with certain characteristics in the vicinity may determine the within-firm and across-firm configurations of observable firm-bank connections.
Keywords: geography of banking, Islamic banking
JEL Classification: G1, L1
Suggested Citation: Suggested Citation