Local banking development and SME conservative financing policy. Does bank branch density matter

Bibliographic Data

ID14867002
AuthorsPaulo M Gama (0000-0002-8394-8301, University of Coimbra, corresponding author), Fátima Sol Murta (0000-0001-7652-7405, University of Coimbra, corresponding author), Euripedes Falcão Vieira (0000-0003-3593-368X, corresponding author)
Year2024
Volume63
Issue4
Pages1747-1765
Publication date2024-12-01
Peer ReviewedYes
Open AccessYes
TypeARTICLE
VenueSmall Business Economics (JOURNAL)
Journal identifiersISSN: 0921-898X • E-ISSN: 1573-0913
PublisherSpringer Science and Business Media LLC (PUBLISHER)
DOI10.1007/s11187-024-00910-6
OpenAlexW4392515054
LanguageEN
References cited53

Does bank branch density matter for the conservative financing puzzle? This paper looks at the importance of nearby physical banking services to the decision to eschew debt among SMEs. Our multivariate logistic models rely on recent information from Portugal, a small open bank-based European economy, and control for firm-level and municipality-level effects. We show that banks' branch density at the municipality level increases the odds of local SMEs following a conservative financing policy. However, the weight of local cooperative bank branches relates negatively to the odds of not using debt. Several robustness checks concerning sampling procedures, estimation methods, and variables’ definitions corroborate our baseline results. Moreover, our results show that the effect of bank branches on the decision to eschew debt is economically more relevant for the long-term than the short-term debt

Business · Debt · Economics · Financial system · Logistic regression · Odds · Robustness (evolution · Banking stability, regulation, efficiency · Corporate Finance and Governance · Working Capital and Financial Performance · Finance

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