Does Geography Affect Bank Loan Rates? The Case of Taiwan

• Main Authors: Ching Wang, 王瀞
• Other Authors: Yeh-Ning Chen
• Format: Others
• Language: en_US
• Published: 2011
• Online Access: http://ndltd.ncl.edu.tw/handle/67317530785828895387

碩士 === 國立臺灣大學 === 財務金融學研究所 === 99 === In this paper, we examine whether the loan spreads are affected by the firms’ locations. According to monitoring cost theory and information asymmetry, the firms in the middle and southern areas of Taiwan should pay higher interest rates than the firms in the northern area because the distance might increase the borrowers’ monitoring costs and the degree of information asymmetry. Beside, the difference in interest rates between large firms and small firms should be higher in the middle and southern areas than in the northern area. However, in Taiwan’s case, we found that the firms in southern area enjoy lower bank spread than their counterparts in the northern area. Furthermore, we found no significant difference of the size spread between the middle and southern areas and the northern area. The regression result of our study shows a puzzle that we are hard to explain in current period. We expect to find a reasonable explanation in the future studies.