Research Discussion Papers, Bank of Finland
No 22/2014:
Bank ownership structure, SME lending and local credit markets
Iftekhar Hasan ()
, Krzysztof Jackowicz, Oskar Kowalewski and Lukasz Kozlowski
Abstract: 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 lower 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 foreign-owned 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.
Keywords: small-business lending; cooperative banks; foreign banks; post-transition countries; (follow links to similar papers)
JEL-Codes: G21; G28; (follow links to similar papers)
57 pages, July 30, 2014
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