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Small Banks and Local Economic Development

Molyneux, P. and Hakens, H. and Hasan, I. and Xie, R. (2014) Small Banks and Local Economic Development. Review of Finance, 19 (2). pp. 653-683. DOI: 10.1093/rof/rfu003

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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.

Item Type: Article
Subjects: Research Publications
Departments: College of Business, Law, Education and Social Sciences > Bangor Business School
Date Deposited: 09 Dec 2014 16:26
Last Modified: 26 Sep 2015 02:29
ISSN: 1573-692X
URI: http://e.bangor.ac.uk/id/eprint/138
Identification Number: DOI: 10.1093/rof/rfu003
Publisher: Oxford University Press
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