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

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.

01. June 2017

Authors Iftekhar Hasan Krzysztof Jackowicz Oskar Kowalewski Łukasz Kozłowski

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Professor Iftekhar Hasan, PhD
Professor Iftekhar Hasan, PhD
Economist

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