Shared Destinies? Small Banks and Small Businesses

Claire Brennecke, Stefan Jacewitz and Jonathan Pogach

The Review of Financial Studies, 2025, vol. 38, issue 11, 3411-3459

Abstract: We identify a new source for the declining role of small banks in the banking industry: Long-term changes in the banking sector are partially a consequence of changes in the industrial sector. Small banks are relatively more exposed to small business shocks, because small businesses compose a larger share of their customers. Lower real-side demand for small business financial services is responsible for part of the relative decline in small banks’ deposits. Rough calculations suggest that deposits at small banks would have been $280 billion higher from 2002 to 2017 if small firms had grown at the rate of larger firms.

Keywords: G21; G34; L25; R12 (search for similar items in EconPapers)
Date: 2025
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