Checking Accounts and Bank Lending

Checking Accounts and Bank Lending
Han, Joong H.
Checking accounts; bank loans
Issue Date
Series/Report no.
KDI Working Paper Series;08-16
Does deposit-taking help lending? Extant theories suggest that there are significant advantages of offering checking accounts and lending together. Despite the synergetic advantages between two traditional banking services, to my knowledge, no prior research directly examines how firms choose checking account providers and how such choices affect loan contract terms. This study attempts to fill the gap. I find that close geographical distance and durable banking relationships mainly determine the use of checking account services. Overall the findings of this paper suggest that the benefits of having checking accounts with lenders arise from credit availability but not from loan pricing.
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