The extant research on the impact of bank structure on bank service to local communities suggests that customers in local markets are better served by broader multi-office banking authority. Using survey data from a sample of over 4000 small businesses in April 1980, this paper analyzes the impact of branching status, bank size, and market size on average loan cost, bank competition for small firm business, credit availability and ratings of bank performance on desired services. The results of this study provide no evidence that banks in statewide branching environments provide better service to small businesses. Branching status was found to have no significant impact on loan costs or credit availability. Firms located in unit branching states had a significantly greater chance of being actively solicited by a bank for its business within the last five years. Banks in statewide branching states were more frequently given poor performance ratings across a broad dimension of desired characteristics in a banking relationship. On the basis of these data, the small business community would find no advantage to broader multi-office banking authority in states where it does not now exist.
local markets, statewide branching, competition, banks
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Dunkelberg, William C. and Scott, Jonathan A., "Bank Structure and Small Business Loan Markets" (1982). Historical Working Papers. 31.