Abstract

Does local banking development stimulate firms' propensity to export? This is the question on which we try to shed light in this article. Indeed, the purpose of our paper is twofold. From a theoretical point of view we aim at demonstrating that in a country with an industrial structure consisting primarily for small and medium-sized firms strongly dependent from local banks, local financial development might represent an additional element influencing firms' propensity to export. At the same time, we provide empirical evidence on this relationship for Italy that can be considered a very interesting case given its high degree of heterogeneity in term of local financial development across geographical areas. Previous literature has shown that finance is relevant for international trade at the country or industry level. We show that it is relevant at the firm level. Specifically we provide evidence that local banking development affects the propensity to exporting, especially for small and medium sized firms.