Journal
EMERGING MARKETS REVIEW
Volume 37, Issue -, Pages 47-65Publisher
ELSEVIER SCIENCE BV
DOI: 10.1016/j.ememar.2018.05.004
Keywords
Financial distress; Bankruptcy; Small and medium-sized enterprises; Local banks; Relationship banking
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Funding
- Polish National Science Center (Narodowe Centrum Nauki) [2016/23/B/HS4/01876, UMO-2016/23/B/HS4/01876]
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We investigate how the presence of local banks affects the prospects of troubled small and medium-sized enterprises (SMEs). Using a new dataset covering the years 2006-2015, we find evidence supporting the notion that local banks extend a helping hand to SMEs and act in this role efficiently. We establish that SMEs operating in regions where local banks hold a relatively strong position suffer losses less frequently, accumulate lower losses in relation to equity capital, report shorter series of losses, have a lower probability of legal bankruptcy or serious financial distress, and recover more easily from financial difficulties. Therefore, our study suggests that policies shaping the local structures of banking markets have a material impact on distressed SMEs' prospects.
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