chapter  2
Financial systems, the geography of firm financing and rating systems
WithFranz Flögel
Pages 77

Chapter 2 outlines the three strands of theory which motivate and guide the comparison of decentralised and centralised banking advanced in this book. Section 2.1 places the study in the comparative financial systems research framework and shows that banking systems affect economic development by influencing firm finance. Section 2.2 turns to bank-based firm financing and discusses its geography. The section elaborates the theoretical basis for the empirical comparison of regional and supraregional banks and explains why distance tends to matter for access to information and consequently for firm financing. Section 2.3 critically reflects on the notion that distance still matters for gaining information in modern banking. Against the background of advantages in ICT and the standardisation of processes, especially the use of rating systems, it challenges the widespread assumption that regional banks decide on credits regionally. Building on theories from the disciplines of sociology and philosophy, it conceptualises rating systems as (distant) non-human actors that impact the credit decisions of banks together with human actors. This conception allows the tracing of the complex geographies of banks’ credit decision making by considering human and non-human actors. Building on this, Section 2.4 specifies the approach used to analyse the distance of banks’ lending decisions to SMEs.