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The value of in-person banking : evidence from U.S. small businesses

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Zhang_2021_RQFA_In_personbanking_CC.pdf (948.8Kb)
Date
27/04/2021
Author
Zhang, Song
Han, Liang
Kallias, Konstantinos
Kallias, Antonios
Keywords
Small business
Relationship banking
Soft information
In-person communication
HG Finance
3rd-DAS
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Abstract
We produce the first systematic study of the determinants and implications of in-person banking. Using survey data from the U.S., we show that firms which are informationally opaque or operate in rural areas are liable to contact their primary bank in-person. This tendency extends to older, less educated, and female business owners. We find that a relationship based on face-to-face communication, on average, lasts 17.88 months longer, spans a wider range of financial services, and is more likely to be exclusive. The associated loans mature 3.37 months later and bear interest rates which are 11 basis points lower. For good quality firms, in-person communication also relates to less discouraged borrowing. These results are robust to multiple approaches for endogeneity, including recursive bivariate probits, treatment effect models, and instrumental variables regressions. Overall, our findings offer empirical grounding to soft information theory and a note of caution to banks against suppressing channels of interpersonal communication.
Citation
Zhang , S , Han , L , Kallias , K & Kallias , A 2021 , ' The value of in-person banking : evidence from U.S. small businesses ' , Review of Quantitative Finance and Accounting , vol. First Online . https://doi.org/10.1007/s11156-021-00982-5
Publication
Review of Quantitative Finance and Accounting
Status
Peer reviewed
DOI
https://doi.org/10.1007/s11156-021-00982-5
ISSN
0924-865X
Type
Journal article
Rights
Copyright © The Author(s) 2021. Open Access. This article is licensed under a Creative Commons Attribution 4.0 International License, which permits use, sharing, adaptation, distribution and reproduction in any medium or format, as long as you give appropriate credit to the original author(s) and the source, provide a link to the Creative Commons licence, and indicate if changes were made. The images or other third party material in this article are included in the article's Creative Commons licence, unless indicated otherwise in a credit line to the material. If material is not included in the article's Creative Commons licence and your intended use is not permitted by statutory regulation or exceeds the permitted use, you will need to obtain permission directly from the copyright holder. To view a copy of this licence, visit http://creativecommons.org/licenses/by/4.0/.
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  • University of St Andrews Research
URI
http://hdl.handle.net/10023/23090

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