Do Local Bank Branches Reduce SME Credit Constraints? Evidence from Public-Private Bank Interaction

10 Pages Posted: 12 Dec 2019

See all articles by Anders Kärnä

Anders Kärnä

Örebro University - Department of Economics; Research Institute of Industrial Economics (IFN)

Agostino Manduchi

Jonkoping University - Jonkoping International Business School (JIBS)

Andreas Stephan

Jonkoping University, Jonkoping International Business School

Date Written: November 19, 2019

Abstract

In the past few decades, commercial banks have substantially reduced the number of their branch offices. We address the question of whether or not the increased distance from the lenders correspondingly faced by many small and medium sized enterprises (SMEs) translates into a lower volume of loans. We use a unique dataset on loans from a state owned Swedish bank designed to support credit-constrained SMEs and interact their loan portfolio with the number of nearby commercial bank offices at the firm level along with an IV strategy to account for endogeneity. The estimation results strongly indicate that a larger number of local bank offices increases the local credit supply, and decreases the credit constraints of nearby SMEs.

Keywords: Credit Constraints, Relationship Banking, State Owned Bank, Small Business

JEL Classification: L52, O38, H81, L26, G28

Suggested Citation

Kärnä, Anders and Manduchi, Agostino and Stephan, Andreas, Do Local Bank Branches Reduce SME Credit Constraints? Evidence from Public-Private Bank Interaction (November 19, 2019). IFN Working Paper No. 1305, 2019. Available at SSRN: https://ssrn.com/abstract=3493023 or http://dx.doi.org/10.2139/ssrn.3493023

Anders Kärnä

Örebro University - Department of Economics ( email )

SE-70182 Orebro
SWEDEN

Research Institute of Industrial Economics (IFN) ( email )

Box 55665
Grevgatan 34, 2nd floor
Stockholm, SE-102 15
Sweden

Agostino Manduchi

Jonkoping University - Jonkoping International Business School (JIBS) ( email )

Jönköping, 55111
Sweden

Andreas Stephan (Contact Author)

Jonkoping University, Jonkoping International Business School ( email )

SE-551 11 Jonkoping
Sweden
55111 (Fax)

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