Bank Ownership Structure, SME Lending and Local Credit Markets

Iftekhar Hasan, Krzysztof Jackowicz, Oskar Kowalewski, ukasz Kozzowski
2014 Social Science Research Network  
In this paper, by employing a novel approach, we study the relationship between bank type and small-business lending in a post-transition country. Using a unique dataset on bank branches and firm-level data, we find that local cooperative banks lend more to small businesses than do large domestic banks and foreign-owned banks, even when controlling for the financial situation of the cooperative banks. Additionally, our results suggest that cooperative banks provide loans to small businesses at
more » ... ower costs than foreign-owned banks or large domestic banks. Finally, we show that small and medium-sized firms perform better in counties with a large number of cooperative banks than in counties dominated by foreignowned banks or large domestic banks. Our results are important from a policy perspective, as they show that foreign bank entry and industry consolidation may raise valid concerns for small firms in developing countries. JEL classification: G21, G28
doi:10.2139/ssrn.2509276 fatcat:triwcf3a2zc6rcacfu5i7dxzly