Abstract
This article discusses the effects of small banks on economic growth. We first theoretically show that small banks operating at a regional level can spur local economic growth. As compared with big interregional banks, small regional banks are more effective in promoting local economic growth, especially in regions with lower initial endowments and severe credit rationing. We then test the model predictions using a sample of German banks and corresponding regional statistics. We find that small regional banks are more important funding providers in regions with low access to finance. The empirical results support the theoretical hypotheses.
| Original language | English |
|---|---|
| Pages (from-to) | 653 - 683 |
| Number of pages | 31 |
| Journal | Review of Finance |
| Volume | 19 |
| Issue number | 2 |
| Early online date | 24 Feb 2014 |
| DOIs | |
| Publication status | Published - 1 Mar 2015 |
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This is a pre-copyedited, author-produced version of an article accepted for publication in [insert journal title] following peer review. The version of record Hendrik Hakenes, Iftekhar Hasan, PhilIP Molyneux, Ru Xie, Small Banks and Local Economic Development, Review of Finance, Volume 19, Issue 2, March 2015, Pages 653–683, is available online at: https://doi.org/10.1093/rof/rfu003
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Ru Xie
- Management - Senior Lecturer (Associate Professor)
- Accounting, Finance & Law
Person: Research & Teaching