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Bank concentration, urban development and firm access to credit in Latin America

Author

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  • Memarian, Mahsa
  • Benetti, Sara
  • Trejos, Alberto
  • Rodríguez-Chaves, Sofía

Abstract

We study the effects of urban characteristics on access to commercial credit. For that purpose, we construct a dataset about the development potential of land in different cities, which takes into account building density, as well as natural geographic constraints. We use these data to assess how the development potential of urban centers affects the impact of bank concentration on financing. We apply our method to Latin America, a region in which banks play a crucial role, and many loans require real estate collateral. In line with the information-based hypothesis, we find a positive relation between bank concentration and firms’ credit accessibility; and we show that the development potential of the cities in which firms are located moderates this positive relationship and helps to explain firm-level differences in access to capital.

Suggested Citation

  • Memarian, Mahsa & Benetti, Sara & Trejos, Alberto & Rodríguez-Chaves, Sofía, 2023. "Bank concentration, urban development and firm access to credit in Latin America," Finance Research Letters, Elsevier, vol. 54(C).
    • Handle: RePEc:eee:finlet:v:54:y:2023:i:c:s1544612323000879
    DOI: 10.1016/j.frl.2023.103713
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