Acta Geographica Sinica ›› 2021, Vol. 76 ›› Issue (8): 1835-1847.doi: 10.11821/dlxb202108002

• Industrial and Regional Development • Previous Articles     Next Articles

The impact of geographical distance on bank loans for China's private enterprises

SONG Changyao1(), LI Tao2, LI Guoping3()   

  1. 1. School of Tourism Sciences, Beijing International Studies University, Beijing 100024, China
    2. School of Business, Hebei University of Economics and Business, Shijiazhuang 050061, China
    3. School of Government, Peking University, Beijing 100871, China
  • Received:2020-05-18 Revised:2021-07-08 Online:2021-08-25 Published:2021-10-25
  • Contact: LI Guoping E-mail:songchangyao@sina.com;lgp@pku.edu.cn
  • Supported by:
    National Social Science Foundation of China(20ZDA040)

Abstract:

Geographical proximity not only helps to reduce information costs but also improves the relationship between banks and enterprises, thus increasing the availability of bank loans. This is why geographical distance affects the finance. We here found that geographical distance between banks and enterprises seeking loans had two effects on bank loans, namely, the "information effect" and "relationship effect". Based on the analysis of the mechanism by which geographical distance affects corporate bank loans, this paper uses the data of bank branches and loans made to private listed companies to characterize the average geographical distance of corporate loans at the municipal level and explore the impact of geographical distance on corporate bank loans. We here found the folllowing: (1) The geographical distance between banks and enterprises has a significant negative impact on the amount of loans. The closer the geographical distance, the greater the amount of money lent; the distance between borrowers and lenders in the same city or the same province showed a significant impact on the amount of money lent. (2) The distance between banks and enterprises in central cities, large cities, and developed cities tended to be greater than that in non-central cities, small cities, and developing cities. The influence of bank-enterprise geographic distance on corporate credit was more prominent in central cities, large cities, and developed cities. (3) Firm size, listing age, and history of state holding can reduce the effect of geographical distance on bank loans. (4) Informatization level and geographical distance have a substitutive relationship in terms of loan availability. The development of informatization can help reduce the restriction of geographical distance on bank loans but cannot eliminate it. The present work argues that it is of great importance to ease this constraint on enterprise financing.

Key words: geographical distance, financial geography, corporate credit, private enterprise, China