Abstract
AbstractWe use the staggered introduction of new flight routes to identify reductions in travel time between banks’ headquarters and branches to examine their effects on branch outputs and efficiency. Reductions in headquarters–branch travel time increases branch‐level mortgage origination volume, and these loans exhibit higher ex post performance. Further analyses suggest these effects are due to branch employees working harder and more efficiently in seeking new customers and screening applications. Overall, our results imply that geographic proximity enables bank headquarters to monitor branches more effectively and mitigate distance‐related agency costs.
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