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

Posted: 5 Nov 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

Leora F. Klapper

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

Iftekhar Hasan

Fordham University - Gabelli School of Business; Bank of Finland

Multiple version iconThere are 2 versions of this paper

Abstract

We try to 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 developed 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 SMEs 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.

Keywords: Banks, community banking, SMEs, financial development, economic growth, international

JEL Classification: G21, G28, G34, F36

Suggested Citation

Berger, Allen N. and Klapper, Leora F. and Hasan, Iftekhar, Further Evidence on the Link between Finance and Growth: An International Analysis of Community Banking and Economic Performance. Journal of Financial Services Research, Forthcoming. Available at SSRN: https://ssrn.com/abstract=461240

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
United States
803-576-8440 (Phone)
803-777-6876 (Fax)

Wharton Financial Institutions Center

Philadelphia, PA 19104-6367
United States

European Banking Center

P.O. Box 90153
Tilburg, 5000 LE
Netherlands

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

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

Register to save articles to
your library

Register

Paper statistics

Abstract Views
1,635
PlumX Metrics