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Financial Agglomeration, Bank Enterprise Distance, and SME Performance: Evidence from China

Author

Listed:
  • Jianpei Li

    (Guangdong University of Finance)

  • Lidong Ma

    (Jinan University)

  • Bowen Li

    (Lanzhou University)

Abstract

Small and medium-sized enterprises (SMEs), which account for about 90% of all market players, the improvement of their total factor productivity (TFP) is related to the high-quality development of China’s economy. Different from the existing research that mainly uses the agglomeration degree of financial resources in a specific geographical unit as a measure of the financial geographical structure, this paper takes enterprises as the center of the circle and measures the level of financial agglomeration by calculating the number of financial institutions within a certain radius. Using the information of 240,000+ financial institutions in China from 2012 to 2020 and the data of 3047 SMEs on the New Third Board, this paper profoundly explores the impact of financial agglomeration on the performance of SMEs. Specifically, when the distance between banks and SMEs is within 5 km, the greater the number of financial institutions around the SMEs, the higher the level of financial agglomeration faced by the SMEs, and the more significant the promoting effect of financial agglomeration on the SMEs TFP. The mechanism analysis shows that reducing the financing constraints of SMEs and increasing the R&D investment of SMEs are two essential channels for financial agglomeration to improve the TFP of SMEs. Further research found that financial agglomeration mainly promoted the improvement of TFP of non-state-owned SMEs, SMEs in the eastern region, and high-asset SMEs.

Suggested Citation

  • Jianpei Li & Lidong Ma & Bowen Li, 2025. "Financial Agglomeration, Bank Enterprise Distance, and SME Performance: Evidence from China," Journal of the Knowledge Economy, Springer;Portland International Center for Management of Engineering and Technology (PICMET), vol. 16(2), pages 8172-8197, June.
    • Handle: RePEc:spr:jknowl:v:16:y:2025:i:2:d:10.1007_s13132-024-02065-x
    DOI: 10.1007/s13132-024-02065-x
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    Keywords

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    JEL classification:

    • G20 - Financial Economics - - Financial Institutions and Services - - - General
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity

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