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SMEs, banks and the spatial differentiation of access to finance

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  • Tianshu Zhao
  • Dylan Jones-Evans

Abstract

By utilizing the SME Finance Monitor and a unique dataset on the geographical location of all bank branches in 11 UK economic regions, this paper examines the relevance of spatial differentiation on SMEs’ access to bank finance during the period of economic weakness following the 2007 financial crisis. We find evidence suggesting the presence of a regional-specific effect on SMEs’ access to bank finance. Our findings show that greater functional distance between bank headquarters and branches exacerbates the credit constraints faced by local SMEs although the impact of a smaller operational distance between branches and local SMEs is inconclusive, ceteris paribus. Our finding holds over a battery of robustness tests.

Suggested Citation

  • Tianshu Zhao & Dylan Jones-Evans, 2017. "SMEs, banks and the spatial differentiation of access to finance," Journal of Economic Geography, Oxford University Press, vol. 17(4), pages 791-824.
    • Handle: RePEc:oup:jecgeo:v:17:y:2017:i:4:p:791-824.
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    File URL: http://hdl.handle.net/10.1093/jeg/lbw029
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    Citations

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    Cited by:

    1. Anna Stansbury & Dan Turner & Ed Balls, 2023. "Tackling the UK’s regional economic inequality: binding constraints and avenues for policy intervention," Contemporary Social Science, Taylor & Francis Journals, vol. 18(3-4), pages 318-356, August.
    2. Eduardo Rodrigues Sanguinet & Francisco de Borja García-García, 2023. "Rural-Urban Linkages: Regional Financial Business Services’ Integration into Chilean Agri-Food Value Chains," Sustainability, MDPI, vol. 15(14), pages 1-22, July.
    3. Memarian, Mahsa & Benetti, Sara & Trejos, Alberto & Rodríguez-Chaves, Sofía, 2023. "Bank concentration, urban development and firm access to credit in Latin America," Finance Research Letters, Elsevier, vol. 54(C).
    4. Flögel, Franz & Gärtner, Stefan, 2018. "Bankensysteme aus raumwirtschaftlicher Perspektive," Working Paper Forschungsförderung 099, Hans-Böckler-Stiftung, Düsseldorf.
    5. Elisa Ughetto & Marc Cowling & Neil Lee, 2019. "Regional and spatial issues in the financing of small and medium-sized enterprises and new ventures," Regional Studies, Taylor & Francis Journals, vol. 53(5), pages 617-619, May.
    6. Flögel, Franz & Gärtner, Stefan, 2018. "The banking systems of Germany, the UK and Spain form a spatial perspective: The German case," IAT Discussion Papers 18/04, Institut Arbeit und Technik (IAT), Westfälische Hochschule, University of Applied Sciences.
    7. Sandhya Garg & Samarth Gupta & Sushanta Mallick, 2023. "Does Social Identity Constrain Rural Entrepreneurship? The Role of Financial Inclusion," IEG Working Papers 460, Institute of Economic Growth.
    8. Mikaela Backman & Tina Wallin, 2018. "Access to banks and external capital acquisition: perceived innovation obstacles," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 61(1), pages 161-187, July.
    9. Giorgio Barba Navaretti & Anna Cecilia Rosso, 2023. "Access to capital markets and the geography of productivity leaders and laggards," Journal of Regional Science, Wiley Blackwell, vol. 63(1), pages 64-113, January.
    10. Sun, Ruohan & Zhou, Nan & Zhang, Bing, 2023. "Can bank branch establishment help SMEs survive? Evidence from China," International Review of Financial Analysis, Elsevier, vol. 88(C).
    11. Carlos Sakyi‐Nyarko & Ahmad Hassan Ahmad & Christopher J. Green, 2022. "The role of financial inclusion in improving household well‐being," Journal of International Development, John Wiley & Sons, Ltd., vol. 34(8), pages 1606-1632, November.
    12. Franz Flögel & Marius Beckamp, 2020. "Will FinTech make regional banks superfluous for small firm finance? Observations from soft information‐based lending in Germany," Economic Notes, Banca Monte dei Paschi di Siena SpA, vol. 49(2), July.
    13. Zhou, Nan & Sun, Ruohan, 2024. "Coping with the storm: The role of fintech in SME survival," International Review of Financial Analysis, Elsevier, vol. 93(C).
    14. Martin Andersson & Johan E. Eklund & Alexandra Tsvetkova, 2023. "Spatial variations in financial constraints of SMEs—evidence from firm-level estimates of investment-cash flow sensitivities in Sweden," Small Business Economics, Springer, vol. 60(4), pages 1683-1698, April.
    15. Flögel, Franz & Hejnová, Tereza, 2021. "The effects of regional banks on economic resilience during the COVID-19 pandemic and the global financial crisis a cross-country comparison of the European countries," IAT Discussion Papers 21/01, Institut Arbeit und Technik (IAT), Westfälische Hochschule, University of Applied Sciences.
    16. Ghinami, Francesca & Montresor, Sandro, 2023. "Tangible and intangible proximities in the access to Venture Capital: evidence from Italian innovative start-ups," SocArXiv hqrj7, Center for Open Science.
    17. De Haas, Ralph & Lu, Liping & Ongena, Steven, 2020. "Close Competitors? Bilateral Bank Competition and Spatial Variation in Firms’ Access to Credit," CEPR Discussion Papers 15015, C.E.P.R. Discussion Papers.
    18. Pauline Avril & Gregory Levieuge & Camelia Turcu, 2023. "Do bankers want their umbrellas back when it rains? Evidence from typhoons in China," Working Papers 2023.08, International Network for Economic Research - INFER.
    19. Franz Flögel & Stefan Gärtner, 2020. "The COVID‐19 Pandemic and Relationship Banking in Germany: Will Regional Banks Cushion an Economic Decline or is A Banking Crisis Looming?," Tijdschrift voor Economische en Sociale Geografie, Royal Dutch Geographical Society KNAG, vol. 111(3), pages 416-433, July.
    20. Sandhya Garg & Samarth Gupta, 2020. "Financial access of unbanked villages in India from 1951 to 2019: ASpatial Approach," IEG Working Papers 403, Institute of Economic Growth.
    21. Flögel Franz & Schepelmann Philipp & Zademach Hans-Martin & Zörner Michael, 2024. "Injecting climate finance into SME lending in Germany: Opportunities for and limitations of regional savings and cooperative banks," ZFW – Advances in Economic Geography, De Gruyter, vol. 68(2), pages 111-123.
    22. Nobuyoshi Yamori, 2019. "The Effects of the Financing Facilitation Act after the Global Financial Crisis: Has the Easing of Repayment Conditions Revived Underperforming Firms?," JRFM, MDPI, vol. 12(2), pages 1-17, April.

    More about this item

    Keywords

    Financial crisis; credit supply; small business financing; bank organization;
    All these keywords.

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • G29 - Financial Economics - - Financial Institutions and Services - - - Other
    • L14 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Transactional Relationships; Contracts and Reputation

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