Banks, Distances and Financing Constraints for Firms

Universita Politecnica delle Marche Economics Working Paper No. 266

57 Pages Posted: 8 Sep 2006

See all articles by Pietro Alessandrini

Pietro Alessandrini

Università Politecnica delle Marche - Faculty of Economics

Andrea Filippo Presbitero

Università Politecnica delle Marche - Department of Economics; Centre for Macroeconomics & Finance Research (CeMaFiR)

Alberto Zazzaro

Università Politecnica delle Marche - Faculty of Economics

Date Written: September 2006

Abstract

While geographical diffusion of banking structures and instruments increased the operational proximity between banks and borrowers, the concentration of bank decisional centres widened the functional distance between banks and local communities. Our findings on Italian data show that increased functional distance makes local borrowers' financing constraints more binding, it being positively associated with the probability of credit rationing, with investment-cash flow sensitivity, with the ratio of credit lines used by borrowers to credit lines available and negatively associated with the scope for overdrawing. These adverse effects are particularly evident for small firms and for firms located in less developed provinces.

Keywords: Local banking systems; Functional distance, Operational proximity, Financing constraints

JEL Classification: G21, G34, R51

Suggested Citation

Alessandrini, Pietro and Presbitero, Andrea Filippo and Zazzaro, Alberto, Banks, Distances and Financing Constraints for Firms (September 2006). Universita Politecnica delle Marche Economics Working Paper No. 266. Available at SSRN: https://ssrn.com/abstract=928826 or http://dx.doi.org/10.2139/ssrn.928826

Pietro Alessandrini

Università Politecnica delle Marche - Faculty of Economics ( email )

Piazzale Martelli, 8
60121 Ancona
Italy

Andrea Filippo Presbitero

Università Politecnica delle Marche - Department of Economics ( email )

Piazzale Martelli, 8
Ancona, AN 60121
Italy
+39 0712207074 (Phone)

HOME PAGE: http://sites.google.com/site/presbitero/

Centre for Macroeconomics & Finance Research (CeMaFiR) ( email )

Piazza Mirabello, 2
Milan, 20100
Italy

Alberto Zazzaro (Contact Author)

Università Politecnica delle Marche - Faculty of Economics ( email )

Piazzale Martelli, 8
60121 Ancona
Italy

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