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Branch network structure, authority and lending behaviour

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  • Pham, Tho
  • Talavera, Oleksandr
  • Tsapin, Andriy

Abstract

Using a novel dataset of Ukrainian banks, this paper examines the link between the structure of branch network and bank lending. Bank regional branches are categorised into contact points without loan decision-making authority and more independent delegated branches which can make loan decisions. We find that a large and dispersed network of contact points can help increase credit supply and mitigate risks through diversification. Further, banks benefit from the information advantage brought by the presence of delegated branches in local markets. However, the longer distance between headquarters and local delegated branches, the more amplified agency problems become, which outweighs the benefits. Our findings suggest that the optimal structure could be a centralised network of delegated branches combined with a diversified access point network.

Suggested Citation

  • Pham, Tho & Talavera, Oleksandr & Tsapin, Andriy, 2022. "Branch network structure, authority and lending behaviour," Economic Systems, Elsevier, vol. 46(4).
    • Handle: RePEc:eee:ecosys:v:46:y:2022:i:4:s0939362522001029
    DOI: 10.1016/j.ecosys.2022.101040
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    More about this item

    Keywords

    Consolidation; Centralisation; Decision-making; Lending; Access points; Delegated branches;
    All these keywords.

    JEL classification:

    • G01 - Financial Economics - - General - - - Financial Crises
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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