Do Local Banking Market Structures Matter for SME Financing and Performance? New Evidence from an Emerging Economy

40 Pages Posted: 6 Feb 2016

See all articles by Iftekhar Hasan

Iftekhar Hasan

Fordham University ; Bank of Finland; University of Sydney

Krzysztof Jackowicz

Kozminski University

Oskar Kowalewski

IESEG School of Management; LEM - CNRS 9221

Łukasz Kozłowski

Kozminski University

Date Written: December 1, 2015

Abstract

This paper investigates the relationship between local banking structures, SME access to debt financing and SME performance. Using a unique dataset on bank branch locations in Poland and county-level and firm-level data, we conclude that a strong position for local, cooperative banks facilitates access to bank financing, lowers financial costs and boosts investment and growth for SMEs. Moreover, counties where cooperative banks hold a strong position are characterized by a quicker pace of new firm creation. However, only local banking markets dominated by supra-local, foreign and domestic banks appear to exert pressure on SMEs to increase efficiency. Our results thus empirically document the advantages and disadvantages of the relationship and arms-length banking models. As a consequence, our findings are important from a policy perspective, as they show that foreign bank entry and industry consolidation may raise valid concerns for SME development prospects in emerging economies.

Keywords: small-business lending, cooperative banks, foreign banks, post-transition countries

JEL Classification: G21, G28

Suggested Citation

Hasan, Iftekhar and Jackowicz, Krzysztof and Kowalewski, Oskar and Kozłowski, Łukasz, Do Local Banking Market Structures Matter for SME Financing and Performance? New Evidence from an Emerging Economy (December 1, 2015). Available at SSRN: https://ssrn.com/abstract=2727941 or http://dx.doi.org/10.2139/ssrn.2727941

Iftekhar Hasan

Fordham University ( email )

45 COLUMBUS AVENUE
GBA-5TH FLOOR
NEW YORK, NY 10023
United States

Bank of Finland ( email )

P.O. Box 160
Helsinki 00101
Finland

University of Sydney ( email )

P.O. Box H58
Sydney, NSW 2006
Australia

Krzysztof Jackowicz

Kozminski University ( email )

ul. JagielloDska 57/59
Warsaw, 03-303
Poland

Oskar Kowalewski

IESEG School of Management ( email )

1 Parvis de La Défense
Socle de la Grande Arche
Paris La Défense cedex, 92044
France

HOME PAGE: http://www.ieseg.fr/en/faculty-and-research/professor/?id=1740

LEM - CNRS 9221 ( email )

Lille
France

HOME PAGE: http://lem.cnrs.fr/

Łukasz Kozłowski (Contact Author)

Kozminski University ( email )

ul. Jagiellońska 57/59
Warsaw, Mazowieckie 03-301
Poland

HOME PAGE: http://www.kozminski.edu.pl

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