scholarly journals Does Lending by banks and non-banks differ? Evidence from small business financing

2017 ◽  
Vol 12 (4) ◽  
pp. 98-104
Author(s):  
Joong Ho Han
Keyword(s):  
Small Business ◽  
Financial Institutions ◽  
Small Firms ◽  
Likelihood Estimation ◽  
Bank Lending ◽  
Bank Loans ◽  
Bank Loan ◽  
Probability Models ◽  
Loan Approval ◽  
Business Financing

Non-bank loans to corporate businesses have shown a dramatic increase compared to bank loans. Despite the increasing importance of non-bank lending, the differences between loans made by different types of lenders are mostly unknown. To uncover the distinctions, the author investigates whether bank and non-bank financial institutions deal differently with information scarcity of small firms by introducing lender-borrower distance as a proxy for information availability. Using the National Survey of Small Business Finances (NSSBF) provided by the Federal Reserve Board, estimate the loan approval probability models after controlling for various borrower characteristics. The NSSBF data is collected by using stratified sampling to ensure sufficient numbers of observations for minority-owned firms. To circumvent potential bias due to the sampling method, the author follows the approach suggested by Wooldridge (1999) and estimates a weighted maximum likelihood estimation to adjust for sampling design. This paper establishes novel evidence supporting the notion that banks and non-bank financial institutions are different in their ability to deal with information scarcity. Bank loan approval probability decreases as distance to their borrowers increases, while its effect on non-bank loan approval probability is statistically insignificant, supporting the notion that non-bank lending is different from bank lending in dealing with information asymmetry.

Bank Loans with Chinese Characteristics: Some Evidence on Inside Debt in a State-Controlled Banking System

2011 ◽  
Vol 46 (6) ◽  
pp. 1795-1830 ◽  
Author(s):  
Warren Bailey ◽  
Wei Huang ◽  
Zhishu Yang
Keyword(s):  
Banking System ◽  
Bank Loans ◽  
Bank Loan ◽  
Inside Information ◽  
Inside Debt ◽  
Social Instability ◽  
Chinese Characteristics ◽  
Loan Approval ◽  
Loan Announcements ◽  
Local Stock

AbstractWe study a transitional economy where state-controlled banks make loan decisions based on noisy inside information on prospective borrowers, and may lend to avert unemployment and social instability. In China, poor financial performance and high managerial expenses increase the likelihood of obtaining a bank loan, and bank loan approval predicts poor subsequent borrower performance. Negative event study responses occur at bank loan announcements, particularly for borrowers measuring poorly on quality and creditworthiness, or for lenders or borrowers involved in litigation regarding loans. Our results highlight dilemmas in a state-led financial system and the local stock market’s sophistication in interpreting news.

Ethnicity and bank lending before and during COVID-19

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Marc Cowling ◽  
Weixi Liu ◽  
Elaine Conway
Keyword(s):  
Bank Lending ◽  
Ethnic Discrimination ◽  
Bank Loans ◽  
Bank Loan ◽  
Success Rates ◽  
Content Type ◽  
Ethnic Business ◽  
Lending Discrimination ◽  
The Uk ◽  
Ethnic Businesses

PurposeUsing ethnicity as our point of focus, the authors consider the dynamics of the demand for bank loans, and the willingness of banks to supply them, as the UK economy entered the COVID-19 pandemic in early 2020 with a particular focus on potential behavioural differences on the demand-side and discrimination on the supply-side. In doing so we directly address crisis induced financial concerns and how they played out in the context of ethnicity.Design/methodology/approachUsing the most recent ten quarterly waves of the UK SME Finance Monitor survey the authors consider whether ethnicity of the business owner impacts on the decision to apply for bank loans in the first instance. The authors then question whether ethnicity influences the banks decision to meet or reject the request for a bank loan.FindingsThe authors’ pre-COVID-19 results show that there were no ethnic differences in loan application and success rates. During COVID-19, both white and ethnic business loan application rates rose significantly, but the scale of this increase was greater for ethnic businesses. The presence of government 100% guaranteed lending also increased general loan success rates, but again the scale of this improvement was greater for ethnic businesses.Research limitations/implicationsThe authors show very clearly that differences in the willingness of banks to supply loans to SMEs relate very explicitly to firm specific characteristics and ethnicity either plays no additional role or actually leads to improved loan outcomes. The data is for the UK and for a very unique COVID time which may mean that wider generalisability is unwise.Practical implicationsEthnic business owners should not worry about lending discrimination or be discouraged from applying for loans.Social implicationsThe authors identify at worst no lending discrimination and at best positive ethnic discrimination.Originality/valueThis is one of the largest COVID-19 period studies into the financing of ethnic businesses.

The Effects of Exports by Small Firms on Their Credit Ratings, Bank Loans and Bank Loan Costs in Korea

2019 ◽  
Vol 15 (6) ◽  
pp. 409-428
Author(s):  
Young-Cheol Choi ◽  
Yeon-Woo Do ◽  
Sung-Hwan Kim
Keyword(s):  
Small Firms ◽  
Credit Ratings ◽  
Bank Loans ◽  
Bank Loan

scholarly journals The development of bank lending to corporate clients in Ukraine in times of economic cycles

2017 ◽  
pp. 72-87 ◽  
Author(s):  
Yaroslav Chaikovskyi
Keyword(s):  
Interest Rates ◽  
Economic Activity ◽  
Bank Lending ◽  
Bank Loans ◽  
Bank Loan ◽  
Economic Activities ◽  
Economic Cycles ◽  
Loan Portfolios ◽  
Major Factors ◽  
Corporate Clients

The article considers bank lending to corporate clients in Ukraine overcoming the issues related to economic cycles. The dynamics of gross domestic product, total assets, and credit portfolios of Ukraine’s banks over the period between 2012 and 2016 is analyzed. The changes in the composition of bank loans to non-financial corporations are analyzed in terms of scheduled payments, forms of currencies, target allocation and economic activities. Additionally, the dynamics and composition of residents’ deposits mobilized by deposit-taking corporations are considered in terms of scheduled payments over the above period. The major factors that hinder the recovery of bank lending to corporate clients are identified. It is highlighted that the main obstacles to the development of banking lending to corporate clients in Ukraine in times of economic cycles are as follows: high interest rates; a significant percentage of unprofitable enterprises and loan arrears in bank loan portfolios; an increase of non-performing loans (NPL); the fact that banks, having sufficient liquidity for lending to economy-boosting projects, prefer to purchase government securities; corrupt practices of granting loans to affiliated companies (insider loans). The percentage of unprofitable enterprises in Ukraine in 2016 is determined and analyzed by type of economic activity. Based on the analysis performed, some assumptions are made about the trends of the development of bank lending to corporate clients in Ukraine and proposals on further harmonization of bank lending to corporate clients in times of economic cycles are set out.

Bank Loans and Small Business Financing in Britain

1974 ◽  
Vol 4 (15) ◽  
pp. 227-233
Author(s):  
R. E. V. Groves ◽  
R. Harrison
Keyword(s):  
Small Business ◽  
Bank Loans ◽  
Business Financing

Effect of Corporate Social Responsibility on Pricing of Small Business Loans

2021 ◽  
pp. 1226-1249
Author(s):  
Markku Vieru ◽  
Janne Peltoniemi
Keyword(s):  
Corporate Social Responsibility ◽  
Small Business ◽  
Social Responsibility ◽  
Small Firms ◽  
Management Practices ◽  
Bank Lending ◽  
Loan Pricing ◽  
Small Business Finance ◽  
Small Business Loans ◽  
Corporate Social

This study analyzes corporate social responsibility (CSR) issues in small business finance in Finland, especially within relationship banking. The study combines credit-file data obtained from a large local Finnish bank with a CSR questionnaire conducted with the bank's business loan managers. The credit-file data contain specific details of CSR characteristics, as well as relationship-, collateral-, firm-, and loan-specific characteristics. CSR, typically considered as a non-financial item, contains value-relevant financial information which affects the loan pricing level. The results show that both overinvestment in CSR and the value created by CSR are valid but connected to different CSR characteristics. Overinvestment is associated with the environment and value creation with diversity and employees. The results contribute to the understanding of the characteristics of CSR in the context of small business bank lending, as well as more generally to important implications for small firms, banks, and management practices.

scholarly journals Funding Challenges of Small and Medium Enterprises in Transition Countries: Kosovo Case Study

2020 ◽  
Vol 3 (2) ◽  
pp. p71
Author(s):  
Fahredin Berisha
Keyword(s):  
Bank Lending ◽  
Transition Countries ◽  
T Test ◽  
Bank Loans ◽  
Bank Loan ◽  
Level Of Education ◽  
Significant Difference ◽  
External Sources ◽  
The One ◽  
One Way Anova

SMEs play a very important role in the development of economies of different countries and they are now considered as a key factor of economic development. They affect unemployment, promote social welfare and can be treated as a promoter of economic growth. The paper addresses the role and importance of financing SMEs in transition countries including Kosovo. The study examines the key factors affecting the increase of SME financing from external sources, namely bank lending since other external sources of financing in Kosovo are scarce and almost non-existent. For the purposes of this paper, data from 215 SMEs surveyed in Kosovo were used, randomly distributed across manufacturing, services and commerce sectors. Data collection was done in the period January-April 2016, and their processing was carried out with SPSS (Social Package for Social Science). In order to have more consistent information during data processing, certain models were used in the paper: Paried-Samples T Test, which was used to investigate the difference between two sets of averages, which indicates that the business plan for the enterprise is relevant to bank loan access. The One Way Anova model was used to test the differences between two or more averages, and through this model is proved that high-profit enterprises have achieved easier access to bank loans. Also following the One Way Anova and Post Hoc LSD test, there were found differences between groups of enterprise by their types, activity and age. The research shows that enterprises with older ages have been able to obtain more easily bank loans. The One Way Anova and Welch-Brown-Forthyse test was used to deal with the level of education of business owners, whereby it was found that owners with a high level of education had easier access to bank loans. Through the Indepedent Samples T Test technique it was found that there is a significant difference between the age groups of the owners based on the mean and standard deviation.

scholarly journals Credit provision by banks: a case study analysis of small businesses in South Africa

2017 ◽  
Vol 12 (4) ◽  
pp. 65-74
Author(s):  
Raphael N. Ngcobo
Keyword(s):  
South Africa ◽  
Small Business ◽  
Small Businesses ◽  
Educational Background ◽  
Bank Loans ◽  
Bank Loan ◽  
Small Business Owners ◽  
Business Owner ◽  
Business Sector ◽  
Business Plans

Small business sector is considered as an important economic driver by many countries. In South Africa, small business sector has been acknowledged as the driving force to boost the economic growth and an important source of job creation. This article aims at identifying factors that are a challenge in obtaining bank finance by small businesses in South Africa.Primary data for this study involved a survey questionnaire directed to owners of small businesses operating in Ekurhuleni Metropolitan area, Gauteng, South Africa. Factors that were deemed to influence bank loan decision were examined. The research findings revealed that factors such as age of business, business plans availability, educational background of business owner, experience of business owner and availability of a collateral have an influence on the bank loan decisions. This research also found that the accessibility of loan funding from banks was a constraint on business operations and growth. The findings of this study indicate that the mentioned factors are a challenge for small businesses in accessing bank loans to fund their operations.The findings of this study will be of great value to small business owners and policy makers in finding solutions to address the identified barriers.

scholarly journals The Impact Of Basel III On Italian Banks Loan Rates: An Accounting-Based Approach

2012 ◽  
Vol 11 (11) ◽  
pp. 1269
Author(s):  
Pasquale Di Biase
Keyword(s):  
Interest Rates ◽  
Banking System ◽  
Bank Lending ◽  
Capital Requirements ◽  
Bank Loans ◽  
Bank Loan ◽  
Basel Iii ◽  
Baseline Scenario ◽  
Percentage Point Increase ◽  
The Impact

This paper empirically investigates the impact of the new capital requirements imposed under Basel III on bank lending rates.A general accounting equilibrium model is developed in order to map the change in the average interest rate on bank loans which is required to preserve the economic performance and the market value of financial institutions under the new regulatory framework.The study refers to the Italian banking system. According to our estimates, the long-term impact of heightened capital requirements on bank loan rates is likely to be modest.In our baseline scenario, we find evidence that each percentage point increase in the capital ratio can be recovered by increasing interest rates with which borrowers are charged by only 5.75 basis points. We conclude that the Italian banking system should be able to adjust to the higher capital requirements imposed by Basel III through a set of operative and commercial levers with no significant effects on the cost of credit for companies and consumers.

scholarly journals BANK LOAN AND SMALL BUSINESS FINANCE MANAGEMENT IN PLATEAU STATE

2021 ◽  
Vol 8 (1) ◽  
pp. 1-12
Author(s):  
Christopher Otubor ◽  
◽  
Ambrose Okwoli ◽  
Yohanna Jugu ◽  
◽  
...  
Keyword(s):  
Small Business ◽  
Small Businesses ◽  
Survey Design ◽  
Bank Loans ◽  
Bank Loan ◽  
Linear Regression Method ◽  
Related Field ◽  
Jos Plateau ◽  
Finance Management ◽  
Plateau State

The importance of small businesses to manage finance from banks served as one of the motivational factors for small business growth. This study investigated the outcome if small businesses managed finance from banks for growth in Jos, Plateau State. The study adopted the descriptive survey design with a population of 550. However, 435 responses as collected from small businesses that enjoyed bank loans. The age bracket of the respondents ranged from twenty-seven years and above. The source of data for this research was primary with a self-administered questionnaire as the instrument for the data collection. The questionnaire used for this study was in a five-point Likert-scale, validated by four senior lecturers in a closely related field. The linear regression method was adopted for data analysis employed to test the hypothesis to investigate how small businesses managed bank loans for growth. The finding showed that small businesses significantly had finance management that grew their business in Plateau State. In conclusion, bank loans and small businesses are mutually inclusive with appropriate finance management by small businesses to grow businesses in Jos, Plateau State. The recommendation was bank loans be made always available to small businesses in Jos, Plateau State since small businesses showed appropriate finance management to grow business.

Sign in / Sign up

Export Citation Format

Share Document