Do local banking market structures matter for SME financing and performance? New evidence from an emerging economy |
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Institution: | 1. Fordham University and Bank of Finland, United States and Finland;2. Department of Banking, Insurance and Risk, Kozminski University, Poland;3. IÉSEG School of Management (LEM-CNRS-UMR 9221), France;4. Department of Banking, Insurance and Risk, Kozminski University, Poland;1. Brazilian School of Public and Business Administration, Getulio Vargas Foundation, Praia de Botafogo 190, 22250-900 Rio de Janeiro, Brazil;2. Deutsche Bundesbank, Wilhelm-Epstein-Straße 14, 60431 Frankfurt am Main, Germany |
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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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