‘Run for home’: SME Lending and the Head Quarters bias •This paper is aimed at two strands of the literature in banking. First, it tests for the geographical dimension in SME lending and the relevance of relationship banking for SME lending. Second, it tests for the view that large institutions with complex organisational structures are more able to filter ‘hard’ information than ‘soft’ information. We estimate a panel model using data on individual bank lending to SMEs and mortgage lending by postcode area for 120 localities in Great Britain for the period 2013(2)-2014(4). We conjecture that as the same bank makes SME loans and mortgages to the specific postcode area, it would utilise common organisational structure and informational technology. We find strong support for the geographical dimension and a vindication of the conventional view that SME lending requires the transmission of ‘soft’ information through the intermediation of a Relationship Manager.
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