Further Evidence on the Link between Finance and Growth: An International Analysis of Community Banking and Economic Performance

40 Pages Posted: 27 Aug 2003

See all articles by Allen N. Berger

Allen N. Berger

University of South Carolina - Darla Moore School of Business; Wharton Financial Institutions Center; European Banking Center

Iftekhar Hasan

Fordham University - Gabelli School of Business; Bank of Finland

Leora F. Klapper

World Bank; World Bank - Development Research Group (DECRG)

Multiple version iconThere are 2 versions of this paper

Date Written: July 24, 2003

Abstract

Berger, Hasan, and Klapper contribute to both the finance-growth literature and the community banking literature by testing the effects of the relative health of community banks on economic growth, and investigating potential transmission mechanisms for these effects using data from 1993-2000 on 49 nations. Data from both industrial and developing nations suggest that greater market shares and efficiency ranks of small, private, domestically-owned banks are associated with better economic performance, and that the marginal benefits of higher shares are greater when the banks are more efficient. Only mixed support is found for hypothesized transmission mechanisms through improved financing for small and medium enterprises or greater overall bank credit flows. Data from developing nations are also consistent with favorable economic effects of foreign-owned banks, but unfavorable effects from state-owned banks.

This paper - a product of Finance, Development Research Group - is part of a larger effort in the group to study international banking.

JEL Classification: G21, G28, G34, F36

Suggested Citation

Berger, Allen N. and Hasan, Iftekhar and Klapper, Leora F., Further Evidence on the Link between Finance and Growth: An International Analysis of Community Banking and Economic Performance (July 24, 2003). FEDS Working Paper No. 2003-47; Bank of Finland Discussion Paper No. 8.2004; World Bank Policy Research Working Paper No. 3105. Available at SSRN: https://ssrn.com/abstract=427780

Allen N. Berger (Contact Author)

University of South Carolina - Darla Moore School of Business ( email )

1705 College St
Francis M. Hipp Building
Columbia, SC 29208
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803-576-8440 (Phone)
803-777-6876 (Fax)

Wharton Financial Institutions Center

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European Banking Center

P.O. Box 90153
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Iftekhar Hasan

Fordham University - Gabelli School of Business ( email )

Rose Hill Campus Bronx
New York, NY 10458
United States

Bank of Finland ( email )

P.O. Box 160
Helsinki 00101
Finland

Leora F. Klapper

World Bank ( email )

1818 H Street, N.W.
Washington, DC 20433
United States
202-473-8738 (Phone)

HOME PAGE: http://econ.worldbank.org/staff/lklapper

World Bank - Development Research Group (DECRG)

1818 H. Street, N.W.
MSN3-311
Washington, DC 20433
United States

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