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Early stage SME's bankruptcy : does local banking market matter?

Author

Listed:
  • Giuseppe Arcuri

  • Nadine Levratto

    (EconomiX - EconomiX - UPN - Université Paris Nanterre - CNRS - Centre National de la Recherche Scientifique)

Abstract

This paper investigates the role of local context, with regard to the effect of local financial development and banking concentration, on a firm's probability of bankruptcy at the post-creation stage. Our empirical setting is based on the logit multilevel model that better allows the treatment of data referring to different levels of aggregation (firm and local variables) applied to companies located in Italy. We find that a higher level of financial development in a province decreases the likelihood of corporate bankruptcy. This result is robust considering a 2SLS regression in which we use instruments for the local financial development and for the concentration of bank branches. In addition, our estimations suggest that the effect of local financial development and bank concentration is shaped by size. Local financial development is particularly significant for small firms, which traditionally suffer from great difficulty in accessing credit, whereas local banking concentration reduces the probability of bankruptcy for medium-sized firms. https://doi.org/10.1007/s11187-018-0042-4

Suggested Citation

  • Giuseppe Arcuri & Nadine Levratto, 2018. "Early stage SME's bankruptcy : does local banking market matter?," Post-Print hal-01742625, HAL.
    • Handle: RePEc:hal:journl:hal-01742625
    DOI: 10.1007/s11187-018-0042-4
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    Cited by:

    1. Francesco Fasano & Maurizio Rocca, 2024. "Local versus national banking development in Europe: who is the winner?," Eurasian Business Review, Springer;Eurasia Business and Economics Society, vol. 14(1), pages 227-256, March.
    2. Honjo, Yuji, 2021. "The impact of founders’ human capital on initial capital structure: Evidence from Japan," Technovation, Elsevier, vol. 100(C).
    3. Giuseppe Arcuri & Marc Brunetto & Nadine Levratto, 2019. "Spatial patterns and determinants of firm exit: an empirical analysis on France," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 62(1), pages 99-118, February.
    4. Huaming Du & Xingyan Chen & Yu Zhao & Qing Li & Fuzhen Zhuang & Fuji Ren & Gang Kou, 2022. "A Comprehensive Survey on Enterprise Financial Risk Analysis from Big Data Perspective," Papers 2211.14997, arXiv.org, revised Mar 2025.
    5. Lisa Crosato & Josep Domenech & Caterina Liberati, 2024. "Websites’ data: a new asset for enhancing credit risk modeling," Annals of Operations Research, Springer, vol. 342(3), pages 1671-1686, November.
    6. Simone Poli & Marco Gatti, 2024. "The relevance of cash flow information in predicting corporate bankruptcy in Italian private companies," MANAGEMENT CONTROL, FrancoAngeli Editore, vol. 2024(1), pages 179-202.
    7. Lara Abdel Fattah & Giuseppe Arcuri & Aziza Garsaa & Nadine Levratto, 2020. "Firm financial soundness and knowledge externalities: A comparative regional analysis," Papers in Regional Science, Wiley Blackwell, vol. 99(5), pages 1459-1486, October.
    8. Mate, Mariluz & Occhino, Paolo, 2020. "A proposal to estimate the valuation of small and medium size companies using geographically comparable information," Small Business International Review, Asociación Española de Contabilidad y Administración de Empresas - AECA, vol. 4(1), pages 34-51, January.
    9. Cynthia Sin Tian Ho & Mats Wilhelmsson, 2022. "Geographical accessibility to bank branches and its relationship to new firm formation in Sweden via multiscale geographically weighted regression," Review of Regional Research: Jahrbuch für Regionalwissenschaft, Springer;Gesellschaft für Regionalforschung (GfR), vol. 42(2), pages 191-218, August.
    10. Francesco Fasano & Tiziana Rocca, 2024. "Does the bank-firm human relationship still matter for SMEs? The game-changing role of digitalization," Small Business Economics, Springer, vol. 62(1), pages 159-178, January.
    11. Crosato, Lisa & Domenech, Josep & Liberati, Caterina, 2021. "Predicting SME’s default: Are their websites informative?," Economics Letters, Elsevier, vol. 204(C).
    12. Julian Oliver Dörr & Georg Licht & Simona Murmann, 2022. "Small firms and the COVID-19 insolvency gap," Small Business Economics, Springer, vol. 58(2), pages 887-917, February.
    13. Jaka Cepec & Peter Grajzl, 0. "Management turnover, ownership change, and post-bankruptcy failure of small businesses," Small Business Economics, Springer, vol. 0, pages 1-27.
    14. Anil Rupasingha, 2024. "Correction: Do businesses vote with their feet to access credit: local financial structure and business relocation," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 72(3), pages 985-985, March.
    15. Ivana Mijatoviæ & Biljana Tošiæ & Milan Jovanoviæ, 2019. "The Acquiring of the Knowledge about Standards in the Digital Era," The AMFITEATRU ECONOMIC journal, Academy of Economic Studies - Bucharest, Romania, vol. 21(51), pages 427-427.
    16. Takano, Keisuke & Okamuro, Hiroyuki, 2020. "Place-based SME finance policy and local industrial revivals: An empirical analysis of a directed credit program after WW2," TDB-CAREE Discussion Paper Series E-2020-01, Teikoku Databank Center for Advanced Empirical Research on Enterprise and Economy, Graduate School of Economics, Hitotsubashi University.
    17. Fasano, Francesco & Rocca, Maurizio La & Cariola, Alfio & Passarelli, Mariacarmela, 2023. "Banking relationship and research spin-offs’ life cycle: The Italian experience," Research in International Business and Finance, Elsevier, vol. 65(C).
    18. Salman Ali & Guihua Li & Yousaf Latif, 2020. "Unleashing the importance of creativity, experience and intellectual capital in the adaptation of export marketing strategy and competitive position," PLOS ONE, Public Library of Science, vol. 15(11), pages 1-26, November.
    19. Jaka Cepec & Peter Grajzl, 2021. "Management turnover, ownership change, and post-bankruptcy failure of small businesses," Small Business Economics, Springer, vol. 57(1), pages 555-581, June.
    20. repec:aud:audfin:v:21:y:2019:i:51:p:427 is not listed on IDEAS
    21. Zhou, Nan & Sun, Ruohan, 2024. "Coping with the storm: The role of fintech in SME survival," International Review of Financial Analysis, Elsevier, vol. 93(C).
    22. Enrique Batiz‐Zuk & Fabrizio López‐Gallo & Abdulkadir Mohamed & Fátima Sánchez‐Cajal, 2022. "Determinants of loan survival rates for small and medium‐sized enterprises: Evidence from an emerging economy," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 27(4), pages 4741-4755, October.
    23. Ciza, Toussaint Bugandwa & Kamdjoug, Jean Robert Kala & Biga-Diambeidou, Mahamadou & Tchokote, Ivan Djossa & Kibekenge, Guillain Birindwa, 2025. "Quality of accounting information and SMEs’ financial performance: The mediating role of bank and informal financing," Research in International Business and Finance, Elsevier, vol. 75(C).
    24. Greta Falavigna & Roberto Ippoliti, 2018. "Industrial spatial dynamics, financial health and bankruptcy: evidence from Italian manufacturing industry," Economia e Politica Industriale: Journal of Industrial and Business Economics, Springer;Associazione Amici di Economia e Politica Industriale, vol. 45(4), pages 533-554, December.
    25. Paulo Miguel Gama & Fátima Sol Murta & Elisabete S. Vieira, 2024. "Local banking development and SME conservative financing policy. Does bank branch density matter?," Small Business Economics, Springer, vol. 63(4), pages 1747-1765, December.

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