Do Norwegian start-ups and smaller business benefit from being located in an area serviced by a local savings bank?

Abstract

We examine the effect of the Norwegian bank industry consolidation, and consequent decrease in local savings banks, on the survival and growth of small businesses. The analysis uses year-by-year financial information for Norwegian companies and bank information from the Bank Location Register. Firstly, a survival analysis is conducted. The analysis finds that companies located in areas with a high degree of savings bank presence, show a higher survival rate. Secondly, the analysis is extended by building several multiple regression models. The models are applied to analyze the effect of savings bank exposure on company growth. The results show a significant negative effect, municipalities (kommune) with low savings bank concentration show more business growth. Results from the multiple regression models indicate that businesses regarded as small, have a growth advantage. Arguably, the multiple regressions indicate growth is not a result of bank presence, rather firm specific and exogenous variables play a vital role.