The Impact of Regional Banking Systems on Firms and SMEs – Evidence from five European Countries

Banks perform similar functions all over the world. Nevertheless, the banking systems around the world are very different. This paper analyses how the difference affects local firms as well as small and medium-sized enterprises. For my project, I combine banking and economic data of five EU countries on NUTS 2 level. I focus on different characteristics of regional banking systems such as the corporate forms of banks (private banks, co-operative banks, public savings banks) or the bank size. I combine this data set with information from almost 850,000 companies in these countries. My results show that regional banking systems, with smaller banks on average, lead to better profitability of enterprises in the respective region. Co-operative banks, LLCs and savings banks foster local firm performance. The results apply to small and medium-sized enterprises in particular