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Industrial District and Local Banks: Do the Twins Ever Meet?

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  • Alberto Baffigi

    ()
    (Banca d'Italia)

  • Marcello Pagnini

    ()
    (Banca d'Italia)

  • Fabio Quintiliani

    (Banca d'Italia)

Abstract

The paper offers theoretical and empirical insights into the links between banks and firms in industrial districts and to the way investment is financed. Theoretically, it is assumed that district-banking localism is embedded in the industrial districtsÂ’ social context. District banks should thus be distinguished by such features as greater concentration of lending, greater concentration of market shares and the cooperative legal form. Counteracting forces (e.g. excessive risk taking, higher monitoring costs and the cooperativeÂ’s typical dilution of power among members) may nonetheless prevent district-banking localism from arising. The empirical analysis crosses an Istat dataset on local labour systems and industrial districts with banking supervisory data as of the end of 1991. Cooperative banks are found to concentrate their lending and to acquire larger market shares in industrial districts, though the evidence is not clear-cut. Mutual banks, on the other hand, generally concentrate their lending to small local labour systems, thereby indicating that their role as local banks is played not only in industrial districts but in non-district areas as well. Finally, in a regression analysis we find that investment by firms operating in industrial districts is more closely correlated with their cash-flow than those of non-district firms, although the pattern varies across regions and economic sectors. The conclusion is that the rise of district banking localism cannot be taken for granted and that IDs do not seem to be homogeneous entities even as far as bank-firm relationships are concerned.

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Bibliographic Info

Paper provided by Bank of Italy, Economic Research and International Relations Area in its series Temi di discussione (Economic working papers) with number 347.

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Date of creation: Mar 1999
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Handle: RePEc:bdi:wptemi:td_347_99

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Keywords: banks; enterprises; business financing;

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References

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  1. Stewart C. Myers & Nicholas S. Majluf, 1984. "Corporate Financing and Investment Decisions When Firms Have InformationThat Investors Do Not Have," NBER Working Papers 1396, National Bureau of Economic Research, Inc.
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  5. Leonard I. Nakamura, 1994. "Small borrowers and the survival of the small bank: is mouse bank Mighty or Mickey?," Business Review, Federal Reserve Bank of Philadelphia, issue Nov, pages 3-15.
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  7. Guinnane, T. & Banerjee, A. & Besley, T., 1993. "Thy Neighbor's Keeper: the Design of a Credit Cooperative with Theory and a Test," Papers 705, Yale - Economic Growth Center.
  8. Myers, Stewart C. & Majluf, Nicholas S., 1984. "Corporate financing and investment decisions when firms have information that investors do not have," Journal of Financial Economics, Elsevier, vol. 13(2), pages 187-221, June.
  9. Mitchell A. Petersen & Raghuram G. Rajan, 1994. "The Effect of Credit Market Competition on Lending Relationships," NBER Working Papers 4921, National Bureau of Economic Research, Inc.
  10. Angeloni, I. & Violi, R., 1997. "Long-Term Interest Rate Convergence in Europe and the Probability of EMU," Papers 322, Banca Italia - Servizio di Studi.
  11. Angelini, P. & Di Salvo, R. & Ferri, G., 1998. "Availability and cost of credit for small businesses: Customer relationships and credit cooperatives," Journal of Banking & Finance, Elsevier, vol. 22(6-8), pages 925-954, August.
  12. Jensen, Michael C. & Meckling, William H., 1976. "Theory of the firm: Managerial behavior, agency costs and ownership structure," Journal of Financial Economics, Elsevier, vol. 3(4), pages 305-360, October.
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  16. Myers, Stewart C. & Majluf, Nicolás S., 1945-, 1984. "Corporate financing and investment decisions when firms have information that investors do not have," Working papers 1523-84., Massachusetts Institute of Technology (MIT), Sloan School of Management.
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Citations

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Cited by:
  1. Pietro Alessandrini & Luca Papi & Alberto Zazzaro, 2003. "Banks, regions and development," BNL Quarterly Review, Banca Nazionale del Lavoro, vol. 56(224), pages 23-55.
  2. Giuseppe Parigi & Roberto Golinelli & Giorgio Bodo, 2000. "Forecasting industrial production in the Euro area," Empirical Economics, Springer, vol. 25(4), pages 541-561.
  3. Pietro ALESSANDRINI & Luca PAPI & Alberto ZAZZARO, 2002. "Banche, territorio e sviluppo," Working Papers 175, Universita' Politecnica delle Marche (I), Dipartimento di Scienze Economiche e Sociali.
  4. Stefano Siviero & Daniele Terlizzese & Ignazio Visco, 1999. "Are model-based inflation forecasts used in monetary policymaking? A case study," Temi di discussione (Economic working papers) 357, Bank of Italy, Economic Research and International Relations Area.
  5. Francesca Bartoli & Giovanni Ferri & Pierluigi Murro & Zeno Rotondi, 2014. "Bank support and export: evidence from small Italian firms," Small Business Economics, Springer, vol. 42(2), pages 245-264, February.
  6. Enrico Beretta & Silvia Del Prete, 2013. "Banking consolidation and bank-firm credit relationships: the role of geographical features and relationship characteristics," Temi di discussione (Economic working papers) 901, Bank of Italy, Economic Research and International Relations Area.
  7. Marco Valentini, 2006. "Ristrutturazione del sistema creditizio, piccole e medie imprese e crescita economica nel mezzogiorno," Departmental Working Papers of Economics - University 'Roma Tre' 0065, Department of Economics - University Roma Tre.

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