Community Involvement, Organizational Hieararchy, and Capital Access: Business Banking in Central Cities and Suburbs.

This study examines whether the number and geographic distribution of local offices maintained by a financial institution and the frequency of interaction between commercial bankers and the owners of local firms have different effects on business lending in urban markets than in their suburban counterparts. Based on an analysis of survey data from four US metropolitan areas, the results indicate that branch offices play a more important role in initiating relationships between banks and small to medium-sized firms in urban areas than in suburban markets. In addition, face-to-face contact between local firm owners and bank executives is an important predictor of borrowing in urban markets, but less so their suburban counterparts. These results suggest that increasing dominance of commercial credit markets by large, geographically diversified banks will tend to exacerbate barriers to capital access faced by small firms based in central cities. [ABSTRACT FROM AUTHOR]