Liberalization, Corporate Governance, and Savings Banks
Gregory F. Udell
We study the effects of the interplay between banking deregulation and corporate governance on the lending behavior of savings banks in Spain. The removal of branching barriers that constrained these banks has led to a nationwide expansion, increasing the number of their branches and their commercial lending volume dramatically. Analyzing a unique data set combining information on the geographic distribution of bank branches and matched lenderborrower financial statements during 1996-2004, we provide evidence that suggests that the governance of those banks affects the way in which they expand their lending activities. In particular, political influence affects where they expand and their ex ante risk taking behavior. Because most countries have a portion of their banking system that is not privately owned, the behavior of these Spanish savings banks may have broader implications about the impact of global banking deregulation and industry consolidation and their interaction with bank governance.
Banck branching, Bank lending, Deregulation, Distance, Geographic expansion
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