The economic impact of changes in local bank presence

Abstract

The study analyses the economic consequences of changes in the local bank presence.Using a unique dataset of banks, firms, and counties in Poland over the period 2009-2014, we show that changes in local banking that increase the role of the relationship banking model are associated with improvements in local labour markets and easier access of SMEs to bank debt. Moreover, radical changes in the ownership structure of large commercial banks result in a more rapid new firm creation. Finally, we document that young companies' performance is more sensitive to the instability of local banking markets.

Place-based entrepreneurs and their competitiveness: a relational perspective on small regional banks

“…Although small regional banks are limited to and dependent on regional markets, they use place as a factor to strategically develop and sustain their place-based business model. These findings are in line with evidence from other European countries about small, regional or nichebased banks and their competitiveness respectively role in fostering regional financing, notably for SMEs (Hasan et al 2019;Degryse et al 2017;Hakenes et al 2015;Fiordelisi and Mare 2014;Howorth and Moro 2006).…”

“…Taken together, the housebank relationship, and the relationship banking taking place within this key SME-bank relationship, as well as other network relationships in the specific region, along with the engagement of banks for the region, jointly support the small regional banks in performing better than their competitors located outside the regional market. This latter finding is echoed by Hasan et al (2019), who show that Polish co-operative banks have a positive influence on regional economic development, based on relationship banking and local interactions.…”

“…Such relationships tend to be persistent; for example, Elsas (2005) shows that an increase in market competition strengthens the housebank relationships. Moreover, the global financial and economic crisis in the past decade has given proof that stable housebank relationships are beneficial to companies because housebanks are more open, in such situations, to loan granting than other types of banks (Ughetto et al 2019;Hasan et al 2019;G€ artner 2009).…”

The structure and relations of banking systems: the UK experience and the challenges of ‘levelling-up’

“…Another consequence of the trust relationships characteristic of decentralized relationship banking is the ability to lend at scope across multiple financial products to the same customers (Hauswald and Marquez, 2006;Puri et al, 2017), thereby further cementing long-standing bank-customer relationships (Boot and Thakor, 1994;Hasan et al, 2019). This allows these types of banks to provide additional value to their customers as well as gathering the information needed to provide these banking services.…”

“…While these banking centralization processes may have increased some, but not all (Alessandrini et al, 2009) aspects of bank efficiency (Berger et al, 2017;Belluci et al, 2019), the firms which often appear to have been relatively disadvantaged by these changes are SMEs (Berger and Udell, 1995;Berger et al, 2004Berger et al, , 2017Canales and Nanda, 2012), and particularly those in more distant locations (Degryse and Ongena, 2005;Jiménez et al, 2009). After controlling for possible endogeneity via the use of differential lag structures (Conroy et al, 2017), system-GM methods (Hasan et al, 2019), or sample selection (Mercieca et al, 2009), local relationship-type banking appears to be especially advantageous for SMEs (Mercieca et al, 2009;Conroy et al, 2017;Hasan et al, 2019). In contrast, after controlling for endogeneity and selection using instrumental variable, conditional models, and system-GMM techniques, it is clear that SMEs in places in which the local banking system is functionally distant are at a disadvantage, especially with regard to their innovation activities (Alessandrini et al, 2009(Alessandrini et al, , 2010.…”