Do local banking market structures matter for SME financing and performance? New evidence from an emerging economy

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Title: Do local banking market structures matter for SME financing and performance? New evidence from an emerging economy
Author: Hasan, Iftekhar ; Jackowicz, Krzysztof ; Kowalewski, Oskar ; Kozłowski, Łukasz
Series: Journal of Banking and Finance
Series volume: 79
Series number: June
Year of publication: 2017
Publication date: 20.3.2017
Published in: Published in BoF 22/2014.
DOI: https://doi.org/10.1016/j.jbankfin.2017.03.009
Page range: 142–158
Keywords: pienyritykset; pkt; yritykset; osuuspankit; ulkomaiset pankit; pankkitoiminta; luotonanto; luotot; rahoitus; siirtymätaloudet
JEL: G21; G28
Other keywords: Small-business lending; Cooperative banks; Foreign banks; Post-transition countries
Abstract: This paper investigates the relationship between local banking structures and SMEs’ access to debt and performance. Using a unique dataset on bank branch locations in Poland and firm-, county-, and bank-level data, we conclude that a strong position for local cooperative banks facilitates access to bank financing, lowers financial costs, boosts investments, and favours growth for SMEs. Moreover, counties in which cooperative banks hold a strong position are characterized by a more rapid pace of new firm creation. The opposite effects appear in the majority of cases for local banking markets dominated by foreign-owned banks. Consequently, our findings are important from a policy perspective because they show that foreign bank entry and industry consolidation may raise valid concerns for SME prospects in emerging economies.


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