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

Zhang, Song, Han, Liang, Kallias, Konstantinos ORCID: https://orcid.org/0000-0002-9431-7222 and Kallias, Antonios ORCID: https://orcid.org/0000-0002-9431-7222 2021. The value of in-person banking: evidence from U.S. small businesses. Review of Quantitative Finance and Accounting 57 , pp. 1393-1435. 10.1007/s11156-021-00982-5

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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.

Item Type:	Article
Date Type:	Publication
Status:	Published
Schools:	Business (Including Economics)
Additional Information:	This article is licensed under a Creative Commons Attribution 4.0 International License
Publisher:	Springer Verlag
ISSN:	0924-865X
Date of First Compliant Deposit:	24 February 2021
Date of Acceptance:	23 February 2021
Last Modified:	23 May 2023 18:37
URI:	https://orca.cardiff.ac.uk/id/eprint/138923

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