IDEAS home Printed from https://ideas.repec.org/a/eee/jbfina/v38y2014icp31-40.html
   My bibliography  Save this article

Dwarf banks

Author

Listed:
  • Chernykh, Lucy

Abstract

This study examines the business model and the viability of very small commercial banks in emerging market context. Using a unique sample of 141 Russian banks with less than a $10 million in assets, I trace performance, survival, recapitalization and growth patterns of these dwarf banks in response to the sharp increase in the minimum capital requirements. I find that dwarf banks are, on average, low-risk financial intermediaries that perform simple operations and have significantly higher survival rates in local markets with poor economic and banking services outreach characteristics. I also find that the average dwarf banks withstand the regulatory capital shock surprisingly well by securing fresh capital injection followed by a twofold asset size increase. The results of this study contribute to the literature on the relationship between the small bank business model, local banking markets characteristics and long-term viability. They also provide new evidence on the expected and unexpected outcomes of the “too small to survive” regulatory intervention into the banking market size structures.

Suggested Citation

  • Chernykh, Lucy, 2014. "Dwarf banks," Journal of Banking & Finance, Elsevier, vol. 38(C), pages 31-40.
    • Handle: RePEc:eee:jbfina:v:38:y:2014:i:c:p:31-40
    DOI: 10.1016/j.jbankfin.2013.09.014
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0378426613003828
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.jbankfin.2013.09.014?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. George A. Kahn & William R. Keeton & Linda Schroeder & Stuart E. Weiner, 2003. "The role of community banks in the U.S. economy," Economic Review, Federal Reserve Bank of Kansas City, issue Q II, pages 15-43.
    2. Allen Berger & Iftekhar Hasan & Leora Klapper, 2004. "Further Evidence on the Link between Finance and Growth: An International Analysis of Community Banking and Economic Performance," Journal of Financial Services Research, Springer;Western Finance Association, vol. 25(2), pages 169-202, April.
    3. Claessens, Stijn, 2006. "Access to financial services: a review of the issues and public policy objectives," Journal of Financial Transformation, Capco Institute, vol. 17, pages 16-19.
    4. Berger, Allen N. & Miller, Nathan H. & Petersen, Mitchell A. & Rajan, Raghuram G. & Stein, Jeremy C., 2005. "Does function follow organizational form? Evidence from the lending practices of large and small banks," Journal of Financial Economics, Elsevier, vol. 76(2), pages 237-269, May.
    5. Robert DeYoung & William Hunter & Gregory Udell, 2004. "The Past, Present, and Probable Future for Community Banks," Journal of Financial Services Research, Springer;Western Finance Association, vol. 25(2), pages 85-133, April.
    6. Beck, Thorsten & Demirguc-Kunt, Asli & Martinez Peria, Maria Soledad, 2007. "Reaching out: Access to and use of banking services across countries," Journal of Financial Economics, Elsevier, vol. 85(1), pages 234-266, July.
    7. repec:zbw:bofrdp:2004_008 is not listed on IDEAS
    8. Berger, Allen N. & Black, Lamont K., 2011. "Bank size, lending technologies, and small business finance," Journal of Banking & Finance, Elsevier, vol. 35(3), pages 724-735, March.
    9. Franklin Allen & Elena Carletti & Robert Cull & Jun QJ Qian & Lemma Senbet & Patricio Valenzuela, 2021. "Improving Access to Banking: Evidence from Kenya [A matter of experience? Understanding the decline in group lending]," Review of Finance, European Finance Association, vol. 25(2), pages 403-447.
    10. Cole, Rebel A. & Goldberg, Lawrence G. & White, Lawrence J., 2004. "Cookie Cutter vs. Character: The Micro Structure of Small Business Lending by Large and Small Banks," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 39(2), pages 227-251, June.
    11. 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.
    12. Honohan, Patrick, 2008. "Cross-country variation in household access to financial services," Journal of Banking & Finance, Elsevier, vol. 32(11), pages 2493-2500, November.
    13. Franklin Allen & Elena Carletti & Robert Cull & Jun QJ Qian & Lemma Senbet & Patricio Valenzuela, 0. "Improving Access to Banking: Evidence from Kenya," Review of Finance, European Finance Association, vol. 25(2), pages 403-447.
    14. Jonathan Scott, 2004. "Small Business and the Value of Community Financial Institutions," Journal of Financial Services Research, Springer;Western Finance Association, vol. 25(2), pages 207-230, April.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Allen N. Berger & William Goulding & Tara N. Rice, 2013. "Do Small Businesses Still Prefer Community Banks?," International Finance Discussion Papers 1096, Board of Governors of the Federal Reserve System (U.S.).
    2. Berger, Allen N. & Goulding, William & Rice, Tara, 2014. "Do small businesses still prefer community banks?," Journal of Banking & Finance, Elsevier, vol. 44(C), pages 264-278.
    3. Pietro Alessandrini & Michele Fratianni & Luca Papi & Alberto Zazzaro, 2016. "The asymmetric burden of regulation: will local banks survive?," Mo.Fi.R. Working Papers 125, Money and Finance Research group (Mo.Fi.R.) - Univ. Politecnica Marche - Dept. Economic and Social Sciences.
    4. Carter, David A. & McNulty, James E., 2005. "Deregulation, technological change, and the business-lending performance of large and small banks," Journal of Banking & Finance, Elsevier, vol. 29(5), pages 1113-1130, May.
    5. DeYoung, Robert & Glennon, Dennis & Nigro, Peter, 2008. "Borrower-lender distance, credit scoring, and loan performance: Evidence from informational-opaque small business borrowers," Journal of Financial Intermediation, Elsevier, vol. 17(1), pages 113-143, January.
    6. Richards, Timothy J. & Acharya, Ram N. & Kagan, Albert, 2008. "Spatial competition and market power in banking," Journal of Economics and Business, Elsevier, vol. 60(5), pages 436-454.
    7. Udell, Gregory F., 2008. "What's in a relationship The case of commercial lending," Business Horizons, Elsevier, vol. 51(2), pages 93-103.
    8. Andrea Bellucci & Alexander Borisov & Alberto Zazzaro, 2016. "Bank Organization and Loan Contracting in Small Business Financing," Mo.Fi.R. Working Papers 118, Money and Finance Research group (Mo.Fi.R.) - Univ. Politecnica Marche - Dept. Economic and Social Sciences.
    9. Degryse, H.A. & Cerqueiro, G.M. & Ongena, S., 2007. "Distance, Bank Organizational Structure and Credit," Other publications TiSEM 34c2f607-3395-4fd9-9c52-4, Tilburg University, School of Economics and Management.
    10. Robert DeYoung & William Hunter & Gregory Udell, 2004. "The Past, Present, and Probable Future for Community Banks," Journal of Financial Services Research, Springer;Western Finance Association, vol. 25(2), pages 85-133, April.
    11. Franklin Allen & Elena Carletti & Robert Cull & Jun Qian & Lemma Senbet & Patricio Valenzuela, 2014. "Resolving the African Financial Development Gap: Cross-Country Comparisons and a Within-Country Study of Kenya," NBER Chapters, in: African Successes, Volume III: Modernization and Development, pages 13-62, National Bureau of Economic Research, Inc.
    12. Durguner, Sena, 2017. "Do borrower-lender relationships still matter for small business loans?," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 50(C), pages 98-118.
    13. Berger, Allen N. & Udell, Gregory F., 2006. "A more complete conceptual framework for SME finance," Journal of Banking & Finance, Elsevier, vol. 30(11), pages 2945-2966, November.
    14. Marcello Pagnini & Silvia Del Prete & Paola Rossi & Valerio Vacca, 2013. "Lending Organization and Credit Supply During the Crisis," ERSA conference papers ersa13p673, European Regional Science Association.
    15. Kano, Masaji & Uchida, Hirofumi & Udell, Gregory F. & Watanabe, Wako, 2011. "Information verifiability, bank organization, bank competition and bank-borrower relationships," Journal of Banking & Finance, Elsevier, vol. 35(4), pages 935-954, April.
    16. de la Torre, Augusto & Martínez Pería, María Soledad & Schmukler, Sergio L., 2010. "Bank involvement with SMEs: Beyond relationship lending," Journal of Banking & Finance, Elsevier, vol. 34(9), pages 2280-2293, September.
    17. Dmytro Holod & Joe Peek, 2013. "The value to banks of small business lending," Working Papers 13-7, Federal Reserve Bank of Boston.
    18. Holod, Dmytro & Torna, Gökhan, 2018. "Do community banks contribute to international trade? Evidence from U.S. Data," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 57(C), pages 185-204.
    19. Norden, L., 2015. "The Role of Banks in SME Finance," ERIM Inaugural Address Series Research in Management EIA-2015-062-F&A, Erasmus Research Institute of Management (ERIM), ERIM is the joint research institute of the Rotterdam School of Management, Erasmus University and the Erasmus School of Economics (ESE) at Erasmus University Rotterdam..
    20. Tchakoute-Tchuigoua, Hubert & Soumaré, Issouf, 2019. "The effect of loan approval decentralization on microfinance institutions' outreach and loan portfolio quality," Journal of Business Research, Elsevier, vol. 94(C), pages 1-17.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:jbfina:v:38:y:2014:i:c:p:31-40. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/jbf .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.