Financial Innovation, Organizations, and Small Business Lending



Technological innovation and changes in bank organizational structure have each had a significant effect on small business lending. Both of these phenomena have a spatial dimension. Technological innovation may allow banks to lend at a longer distance if it significantly diminishes the importance of direct customer contact. If consolidation produces fewer banking offices, then the average distance between borrowers and lenders will necessarily increase. The impact of these effects on small business lending, however, greatly depends on the extent to which hard information about borrower quality is a good substitute for soft information. This chapter assesses the theoretical and empirical evidence on the extent to which these changes will likely effect small business lending.


Small Business Small Bank Bank Lending Soft Information Community Bank 
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Copyright information

© Springer Science+Business Media, LLC 2009

Authors and Affiliations

  1. 1.Department of Finance, Kelley School of BusinessIndiana University1309 E. BloomingtonUSA

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