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Is there anything special about local banks as SME lenders? Evidence from bank corrective programs

Author

Listed:
  • Iftekhar Hasan

    (Fordham University, Bank of Finland and University of Sydney)

  • Krzysztof Jackowicz

    (Department of Banking, Insurance and Risk, Kozminski University, Poland)

  • Robert Jagiełło

    (Warsaw School of Economics and National Bank of Poland)

  • Oskar Kowalewski

    (IÉSEG School of Management and LEM-CNRS (UMR 9221))

  • Łukasz Kozłowski

    (Department of Banking, Insurance and Risk, Kozminski University, Poland)

Abstract

We re-investigate the special role of local banks in shaping the financial constraints of small and medium-sized enterprises (SMEs). Using a comprehensive dataset from an emerging economy, including the information on local bank corrective programs, we find that local banks remain privileged and, most importantly, difficult to replace lenders for SMEs. We show that the deterioration of a SME’s access to bank financing linked to local banks’ corrective programs depends on the presence of other healthy local banks in the SME’s vicinity. Furthermore, we demonstrate that healthy local banks, when their neighboring peers experience financial difficulties, substantially increase lending.

Suggested Citation

  • Iftekhar Hasan & Krzysztof Jackowicz & Robert Jagiełło & Oskar Kowalewski & Łukasz Kozłowski, 2018. "Is there anything special about local banks as SME lenders? Evidence from bank corrective programs," Working Papers 2018-ACF-06, IESEG School of Management.
    • Handle: RePEc:ies:wpaper:f201806
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    Keywords

    Smart Beta; strategic beta; factor investing; factor selection; Bayesian variable selection;
    All these keywords.

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