Keep Walking? Geographical Proximity, Religion, and Relationship Banking

34 Pages Posted: 25 Jul 2015 Last revised: 17 May 2016

Thorsten Beck

City University London - Sir John Cass Business School; Tilburg University - European Banking Center, CentER

Steven Ongena

University of Zurich - Department of Banking and Finance; Swiss Finance Institute

Ilkay Sendeniz-Yuncu

Middle East Technical University

Date Written: May 16, 2016

Abstract

We investigate the geographical proximity of firms to their relationship banks. We find that (compared to the firms' average bank) 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. For example, if the bank in the vicinity is an Islamic bank, distance plays a more muted role, especially in cities in the Mediterranean and Aegean regions, as well as in cities with a high conservative party vote and higher trust in religious institutions. Also 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 of firms 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

Beck, Thorsten and Ongena, Steven and Sendeniz-Yuncu, Ilkay, Keep Walking? Geographical Proximity, Religion, and Relationship Banking (May 16, 2016). Available at SSRN: https://ssrn.com/abstract=2635385 or http://dx.doi.org/10.2139/ssrn.2635385

Thorsten Beck

City University London - Sir John Cass Business School ( email )

106 Bunhill Row
London, EC1Y 8TZ
United Kingdom

Tilburg University - European Banking Center, CentER ( email )

PO Box 90153
Tilburg, 5000 LE
Netherlands

Steven R. G. Ongena (Contact Author)

University of Zurich - Department of Banking and Finance ( email )

Schönberggasse 1
Zürich, 8001
Switzerland

Swiss Finance Institute ( email )

Quartier UNIL-Dorigny, Bâtiment Extranef, # 211
40, Bd du Pont-d'Arve
CH-1015 Lausanne, CH-6900
Switzerland

Ilkay Sendeniz-Yuncu

Middle East Technical University ( email )

Ankara
Turkey

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