scholarly journals Heterogeneity and state dependence in firms’ access to bank credit

2021 ◽  
Author(s):  
David Aristei ◽  
Gabriele Angori
Keyword(s):  
Unobserved Heterogeneity ◽  
Public Support ◽  
Credit Rationing ◽  
State Dependence ◽  
Significant Degree ◽  
Bank Loans ◽  
Bank Credit ◽  
Firm Level ◽  
Access To Credit ◽  
Bank Financing

Abstract This paper investigates firms’ access to bank credit in eleven euro area countries over the periods 2014–2019. Exploiting firm-level longitudinal data, we analyse loan demand and credit rationing probabilities, accounting for sample selection, unobserved heterogeneity and state dependence. Empirical results show that small and informationally opaque businesses, with deteriorated public support and credit history, face greater difficulties in obtaining bank loans. Furthermore, we provide evidence of a significant degree of state dependence in access to credit. In particular, firms that have already experienced credit restrictions are more likely to face further constraints, while enterprises that applied for bank financing in the past seem to have easier access to credit. Focusing on the subset of firms actually needing additional bank financing, we also find that past credit restrictions significantly reduce their current demand, providing evidence of a significant discouragement effect.

scholarly journals Bank Financing and Firms Performance in Sub-Saharan Africa: Evidence of Cameroon and Senegal

2020 ◽  
Vol 12 (5) ◽  
pp. 42
Author(s):  
Agbemebia Akitan ◽  
Seydi Ababacar Dieng
Keyword(s):  
Negative Impact ◽  
Credit Rationing ◽  
Sub Saharan Africa ◽  
Sales Growth ◽  
Access To Credit ◽  
Bank Financing ◽  
Relational Behavior ◽  
The Common ◽  
Sub Saharan ◽  
The Impact

Using survey data, the aim of this paper is to analyze the impact of bank financing on firms performance both in Cameroon and Senegal. Performance is measured in terms of sales growth. Our methodology is based on an analysis of variance to test if access to credit leads to a difference in performance and on econometric modeling. The main estimation result is that bank financing has a negative impact on firms performance. This result is explained by the credit rationing and the lack of relational behavior on the credit market. Our findings suggest the establishment of a close bank-enterprise relationship in the common quest to promote economic growth.

Bank financing and credit rationing of Australian SMEs

2016 ◽  
Vol 42 (1) ◽  
pp. 58-85 ◽  
Author(s):  
Scott McCarthy ◽  
Barry Oliver ◽  
Martie-Louise Verreynne
Keyword(s):  
Chief Executive Officer ◽  
Product Innovation ◽  
Small Firms ◽  
Credit Rationing ◽  
Chief Executive ◽  
Bank Credit ◽  
Business Plans ◽  
Bank Financing ◽  
Agriculture Industry

This paper investigates two aspects of bank financing using a sample of 1,973 Australian small to medium sized enterprises (SMEs). We compare the variables that explain why Australian small to medium sized enterprises seek bank finance with those that underpin bank credit rationing of loan applications. Our analysis highlights that little overlap exists between the two sets of variables. Larger small to medium sized enterprises with growth intentions, business plans, and those in the agriculture industry are significantly more likely to seek finance. In contrast, firms in agriculture that are older, and that have incremental product innovation, 40% or more of export sales, and a male Chief Executive Officer, are less likely to be credit rationed. Importantly, having business plans, whether in large or small firms, does not relate significantly to credit rationing.

Financing successful small business projects

2014 ◽  
Vol 52 (2) ◽  
pp. 365-377 ◽  
Author(s):  
Irene Comeig ◽  
Esther B. Del Brio ◽  
Matilde O. Fernandez-Blanco
Keyword(s):  
Interest Rates ◽  
Project Success ◽  
Success Probability ◽  
Credit Rationing ◽  
Bank Loans ◽  
Data Set ◽  
Content Type ◽  
Loan Contracts ◽  
Access To Credit ◽  
High Success Probability

Purpose – The current credit rationing strongly influences the viability of SMEs innovation projects. In this context, the practice of screening borrowers by project success probability has become a paramount consideration for both lenders and firms. The aim of this paper is to test the screening role of loan contracts that consider collateral-interest margins simultaneously. Design/methodology/approach – This paper presents an empirical analysis that uses a unique data set composed of 323 bank loans granted by 28 banks to SMEs backed by a Spanish Mutual Guarantee Institution. Findings – The results show that appropriate combinations of collateral and interest rates can distinguish between borrowers with different project success probability: low success probability borrowers finance its projects without collateral and with high interest rates, whereas high success probability borrowers accept loans with real estate collateral and low interest rates. Practical implications – This screening mechanism reduces credit rationing, thus increasing good projects' access to credit. Originality/value – This study provides the first empirical evidence on the effectiveness of collateral-interest pairs as a self-selection mechanism.

State dependence and unobserved heterogeneity in the employment transitions of the over-50s

2009 ◽  
Vol 38 (3) ◽  
pp. 523-554 ◽  
Author(s):  
Lorenzo Cappellari ◽  
Richard Dorsett ◽  
Getinet Haile
Keyword(s):  
Unobserved Heterogeneity ◽  
State Dependence ◽  
Employment Transitions

Influence of Entrepreneur and Firm Characteristics in Accessing Bank finance

2021 ◽  
Vol 5 (3) ◽  
pp. 41-52
Author(s):  
Kili Muhindi Rop ◽  
◽  
Edgar Ouko Otumba ◽  
Peter Kibas ◽  
Bernard Kibet i Nassiuma ◽  
...  
Keyword(s):  
High Performance ◽  
Service Providers ◽  
Firm Characteristics ◽  
Chi Square ◽  
Business Plans ◽  
Access To Credit ◽  
Bank Financing ◽  
Business Form ◽  
Chi Square Test ◽  
Medium Enterprise

SMEs are mostly guided by the owners’ characteristics which is an indicator of the level of decisions taken in the firm. Access to credit is a prerequisite for a high performance of an SME. The paper aimed at establishing the empirical link between entrepreneurs and firm characteristics and access to bank financing by SMEs in Eldoret town. Descriptive and explanatory research designs were employed in the study. A chi-square test of association was used to determine the relationship between study variables. The study findings indicated that gender and number of employees had a significant influence on access to bank financing. Male entrepreneurs are more likely to get bank financing compared to their female counterparts, while an increase in the number of employees increases the success rate of getting bank financing. However, age, education, business form, number of years of operation, stage of business and average turnover were found to be insignificant in obtaining funding. The study concluded that entrepreneur characteristics namely gender and relation to business and firm characteristics specifically structure of the business, economic sector and the average turnover determines the likelihood of banks financing SMEs. Entrepreneurial and firm characteristics were found to be important in access to bank financing. The study recommended that government and other service providers incorporate additional simplified components to their training packages to cover such areas as bookkeeping and development of business plans. Banks should develop lending policies which are friendly to Small and Medium Enterprise contexts. Keywords: Entrepreneur, firm characteristics, access, bank financing, SMEs

Bank competition, government intervention and SME debt financing

2017 ◽  
Vol 7 (4) ◽  
pp. 478-492 ◽  
Author(s):  
Jianhua Du ◽  
Chao Bian ◽  
Christopher Gan
Keyword(s):  
Government Intervention ◽  
Generalized Method Of Moments ◽  
External Debt ◽  
Ordinary Least Squares ◽  
Debt Financing ◽  
Bank Loans ◽  
Bank Competition ◽  
Firm Level ◽  
Content Type ◽  
The Government

Purpose The purpose of this paper is to examine the effects of the government intervention and bank competition on small and medium enterprise (SME) external debt financing in Chinese capital market. Design/methodology/approach This study uses ordinary least squares with standard errors clustered at the firm level. In addition, the authors use the dynamic system generalized method of moments to address the possible endogeneity issue in the regressions. Findings Using a sample of 908 firms from 2000 to 2010, the authors found that SMEs are more likely to access bank loans only in regions with higher level of government intervention than median government intervention. Further, the result shows that the government is motivated to help SMEs to obtain more external debt in regions where the level of bank competition is lower than the median bank competition index. Last, the authors found evidence that firms with politically connected CEOs are likely to access bank loans. Research limitations/implications This paper highlights that government intervention enables the SMEs to secure more bank loans. Second, the authors’ results imply that the government is motivated to help SMEs to obtain more external debt in regions with low level of bank competition. Originality/value This study contributes to the current literature by revealing that government intervention is the driving force alleviating SMEs’ constraints in accessing external financing. Second, this study finds the evidence to supports the argument that government has a strong motive to help SMEs to secure long-term credits for political purpose (Fan et al., 2012), when the level of bank competition is low (Berger and Udell, 2006).

scholarly journals Foreign Capital, Real Sector Financing and Excessive Leverage in Turkey: What Went Wrong?

2020 ◽  
Vol 10 (1) ◽  
pp. 30-39
Author(s):  
Bahadır Karakoç
Keyword(s):  
Foreign Capital ◽  
Financial Sector ◽  
Economic Conditions ◽  
Real Sector ◽  
Contributing Factors ◽  
Firm Level ◽  
Access To Credit ◽  
Debt Burden ◽  
Heavy Burden ◽  
Stock Market Trading

Recently, large swings in inflation and exchange rates revealed that non-financial sector is heavily geared and extremely vulnerable. Therefore, a study trying to identify the contributing factors is needed. Separating firms into groups, based on size and stock market trading status; changes in financing patterns are investigated via panel data methodology. The study aims at fulfilling the need for analyzing the consequences of foreign capital flow at firm level and documenting its significance in addition to assessing the efficacy of contemporary monetary policy. Economic conditions significantly facilitated lending process, strengthening corporate access to credit, and resulted in excessive borrowing both in the form of foreign and domestic currency. With such heavy burden of debt, non-financial sector has been facing both exchange rate and the liquidity risks. The more severely a firm was previously challenged by financing limitations, the more it borrowed once the limitations are relaxed, contributing to excessive debt burden of the economy in proportion to its previous financing challenges.

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