Move a Little Closer? Information Sharing and the Spatial Clustering of Bank Branches
64 Pages Posted: 9 Jan 2018 Last revised: 28 Jun 2023
There are 4 versions of this paper
Move a Little Closer? Information Sharing and the Spatial Clustering of Bank Branches
Move a Little Closer? Information Sharing and the Spatial Clustering of Bank Branches
Move a Little Closer? Information Sharing and the Spatial Clustering of Bank Branches
Move a Little Closer? Information Sharing and the Spatial Clustering of Bank Branches
Date Written: April 24, 2019
Abstract
We present a model of credit market competition to derive key hypotheses about how information sharing between banks influences the spatial clustering of their branches. We then test these hypotheses using data on 56,555 branches owned by 614 banks across 19 countries. We find that information sharing incentivizes banks to establish branches in localities that are new to them but that are already served by other banks. The resultant branch clustering is associated with reduced spatial credit rationing, as information sharing enables firms to access credit from more distant banks. These findings underscore how information sharing makes it more important for banks to move closer to each other rather than closer to their borrowers.
Keywords: Information sharing, branch clustering, spatial bank competition
JEL Classification: D43, G21, G28, L13, R51
Suggested Citation: Suggested Citation