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- Title
Small Banks and Local Economic Development.
- Authors
HAKENES, HENDRIK; HASAN, IFTEKHAR; MOLYNEUX, PHILIP; RU XIE
- Abstract
This article discusses the effects of small banks on economic growth. We firs 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 endowment 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 result support the theoretical hypotheses.
- Subjects
GERMANY; COMMUNITY banks; REGIONAL banks; ECONOMIC development; CREDIT control; BANKING industry; ECONOMICS
- Publication
Review of Finance, 2015, Vol 19, Issue 2, p653
- ISSN
1572-3097
- Publication type
Article
- DOI
10.1093/rof/rfu003