Bank Lending, Geographical Distance, and Credit risk: An Empirical Assessment of the Church Tower Principle

Arbeitspapier

Does the Church Tower Principle, i.e. geographical proximity between borrowing firm and lending bank, matter in credit risk management? If so, the bank might expose itself to a greater risk by lending to distant firms and should therefore respond by rationing them harder. In this paper we incorporate the Church Tower Principle in a simple theoretical model and derive implications that are empirically testable. We use data on corporate loans granted 1994 to 2000 by a leading Swedish bank and find no evidence that the principle applies.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: Sveriges Riksbank Working Paper Series ; No. 144

Classification and Topics

• Classification: Wirtschaft ; Asymmetric and Private Information; Mechanism Design ; Banks; Depository Institutions; Micro Finance Institutions; Mortgages
• Subject: Asymmetric information ; credit rationing ; duration model

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Carling, Kenneth ; Lundberg, Sofia
• Event: Veröffentlichung
• (who): Sveriges Riksbank
• (where): Stockholm
• (when): 2002

Further information

• Handle: http://hdl.handle.net/10419/82488
• Last update: 10.03.2025, 11:44 AM CET