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Review of Quantitative Finance and Accounting

, Volume 52, Issue 1, pp 289–324 | Cite as

How local is local? Evidence from bank competition and corporate innovation in U.S.

  • Lin TianEmail author
  • Liang Han
Original Research
  • 165 Downloads

Abstract

This paper aims to fill in a research gap in the effects of bank competition on corporate innovation. In addition to the evidence on the favorable effects of bank competition on corporate innovation, this paper shows novel evidence on the substitution effects of bank competition in a wider region and neighbor-state to local bank competition in financing corporate innovation activities. In financing innovation, we show ‘how local is local’ depends on the operating scope and information transparency of firms. Local banks have an information advantage over distant banks in financing local businesses and informationally opaque corporate innovation activities. Therefore, improved competition in distant banking markets may have limited ability to substitute the favorable effects of local bank competition in facilitating corporate innovation activities.

Keywords

Bank competition Corporate innovation Substitution Operating scope Information transparency 

JEL Classification

G10 G20 G21 

Notes

Acknowledgements

We thank Manthos Delis, Mauro Costantini, Dimitris Petmezas, Fu Xin, the participants of European Financial Management Symposium, Editor-in-Chief Prof Cheng-Few Lee, and two anonymous referees for helpful comments and suggestions to this study.

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Copyright information

© Springer Science+Business Media, LLC, part of Springer Nature 2018

Authors and Affiliations

  1. 1.School of Management and EconomicsUniversity of Electronic Science and Technology of ChinaChengduChina
  2. 2.Henley Business SchoolUniversity of ReadingReadingUK

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