The Role of Local Banks for SMEs Financing: New Evidence from Europe

Through our work we aim to add to the economic literature which focuses attention on the relationship existing between local banks and small and medium enterprises in Europe, in order to research for their potential impact on economic development and growth of different countries (Berger, Udell, 2006; Beck, Demirgüç-Kunt, 2006; Beck et al., 2009; De la Torre et al, 2010). More specifically, after considering the evolution observed over the last few years by different countries, together with the level of competition achieved by their banking systems (Petersen, Rajan, 2002; Degryse, Laeven, Ongena, 2009), we look for the presence of any banks able to meet the criteria for a local small bank, so to understand its role in supporting the local economy and the development of SMEs (Berger, Udell, 2006). In order to achieve this result, we created a unique and original dataset, covering the period from 1999 to 2011, where the differences between the various European banking systems are considered, together with the main performance achieved by small and medium enterprises: the results we obtained, among other issues, confirm our hypothesis about the positive effect that local banks can play in order to generate a major level of credit available for enterprises (Allen, Gale, 2007; Borio, Zhu, 2008; Acharya, Richardson, 2009).