The provision of long-term credit and firm growth in developing countries

Do small and young firms benefit from an increase in the provision of long-term loans? By combining firm-level data from 62 countries (over the period 2006–2016) with a new database on short-term and long-term credit provided to the private sector, this article shows a higher provision of long-term credit does not stimulate growth of small and young firms. On the contrary, an increase in the availability of short-term credit spurs firm growth. The main explanation of this (counter-intuitive) result is the differential impact of short-term and long-term credit provision on small and young firms’ access to credit. Young and small firms are able to take advantage of an increase of short-term loans, which allow them to switch from informal finance to bank loans. However, a higher level of long-term credit does not alleviate credit constraints faced by opaque firms because these funds are allocated towards transparent borrowers.     

Bank loans vs. trade credit

Using a World Bank dataset of Chinese firms, we investigate the relative importance of bank loans and trade credit in promoting firm performance. To deal with possible endogeneity issues, we employ distinct and separable instrumental variables for bank loans and trade credit. We find that access to bank loans is central to improving firm performance and growth, while the availability of trade credit is much less important. Our results suggest that trade credit cannot effectively substitute for bank loans. Overall, our findings suggest the need for further development of China's formal financial institutions, which would enable the non‐state sector to grow much faster than it has grown in recent decades.     

Post Keynesian endogenous money theory: A theoretical and empirical investigation of the credit demand schedule

The article investigates the relationship between interest rates and loan amounts provided by commercial banks from both a theoretical and an empirical perspective. Theoretically, some scholars belonging to the post Keynesian endogenous money tradition advocate that a decrease (increase) in interest rates leads to a positive (negative) effect on the amount of loans demanded by households and firms. On the other hand, some heterodox economists maintain that interest rates do not stimulate firms’ credit demand but that a certain degree of influence is allowed for loans provided to households. By applying a vector autoregression (VAR) and vector error-correction model (VECM) methodology to European Central Bank and Organisation for Economic Co-operation and Development data for the eurozone, this article proposes an empirical validation of such theoretical premises by analysing the relationship between the different types of credit provided by commercial banks and the corresponding interest rates. The main results show a negative relationship between the interest rates and the credit provided for the purchase of houses. Conversely, no significant relationship is found between loans granted to enterprises and loans for the purchase of consumption goods and the corresponding interest rates.     

Bank versus nonbank financial institution lending behaviour: indictors of firm size,risk or ownership?

Using 1251 matched commercial loan deal terms of listed companies over the period 2003–2014, we examine the heterogeneity of lending behaviours of bank and nonbank financial institutions. The results show that large firms have a higher likelihood of getting loans from nonbank financial institutions. Compared to banks, nonbank financial institutions are more likely to provide credit help to high operation risk firms. State-owned listed firms have a higher probability to get finance from nonbank financial institutions than private firms, which highlights the situation that private firms are in a weak position to get credit help from China’s financial system. Moreover, the process of increasing the banks’ noninterest income ratio tends to drives firms to borrow from nonbank financial institutions.     

The Significance of Credit Rationing on Real Investment Activity – A Test for the Significance of Capital-Market Imperfection in Japan

Does bank credit matter to the real investment finance of firms? If so, to what kind of firms does it matter, and why? Despite the progress of research in this field, there is still little empirical consensus on these problems. This paper contributes to the understanding of capital-market imperfection in Japan by answering these questions. I introduce new methods to test the significance of credit rationing and show that bank credit is indeed a very important determinant of real investment activity of small firms. The availability of long-term loans has particularly significant effects on the investment opportunities of small firms, although large firms with capital of more than 1 billion yen are free from credit rationing. JEL Classification Numbers: C51, E44, G21.     

非对称信息条件下信贷市场分析

随着市场机制的建立和金融体制改革的深入,企业与银行之间的借贷关系日益复杂,银行对企业的放贷面临新的挑战。企业为了获得贷款想方设法隐瞒自己信息,银行为了避免损失,极力加强监管力度。由于商业银行(放款者)与企业(贷款者)之间存在着信息不对称性,所以它直接影响银行的贷款风险决策。     

A QUEST FOR UNFETTERED CREDIT: HOW MONETARY POLICY DRIVES CREDIT RISK TRANSFER OF STRUCTURED FINANCE PRODUCTS

This study examines the effects of monetary policy contractions on bank loans to households and firms and instruments in three different credit risk transfer (CRT) capital markets over two separate time periods (1995–2006 and 2007–2015). The findings show that in both periods, banks decrease business lending but increase lending to consumers through a combination of mortgage, auto, credit card, and student loans from more liquidity produced by consumer‐related CRT activity. Additional results reveal relative CRT movements toward securitized mortgages from bank mortgage debt over both periods and toward securitized and insured business loans from bank business debt in the latter period, which suggest vulnerabilities among interconnected credit markets. (JEL E44, E51, G21, G23)     

Bank lending procyclicality and credit quality during financial crises

This paper analyses macroeconomic and financial determinants of bad loans applying a SVAR approach to investigate whether excessive loans granted during expansionary phases can explain the more than proportional increase in non-performing loans during contractionary periods. The results indicate that the effects of a permanent shock to bad loans on the excess of credit are significant and persistent for bad loans to firms, but not for bad loans to households or in the case of Cooperative Credit Banks, who adopt more efficient lending policies.     

The bank lending channel of unconventional monetary policy: The impact of the VLTROs on credit supply in Spain

We assess the impact on the credit supply to non-financial corporations of the two very long term refinancing operations (VLTROs) conducted by the Eurosystem in December 2011 and February 2012 for the case of Spain. To do so we use bank–firm level information from a sample of more than one million lending relationships during two years. Our methodology tackles three main identification challenges: (i) how to disentangle credit supply from demand; (ii) the non-random assignment of firms to banks; (iii) the endogeneity of the VLTRO bids, as banks with more deteriorated funding conditions were more likely both to ask for a large amount of funds and to restrain credit supply. Our findings suggest that the VLTROs had a positive moderate-sized effect on the supply of bank credit to firms. We also find that the effect was greater for illiquid banks and that it was driven by credit to SMEs, as there was no impact on loans to large firms. By contrast, strong firm–bank relationships were less sensitive to the positive liquidity shock caused by the VLTROs, which is consistent with the studies that find that relationship lending is a more stable source of credit than transaction lending. Finally, the VLTROs had no impact on either the degree of loan collateralisation or the probability of making loans to new borrowers, while they decreased the probability of renewing old ones, which suggests that those funds were not used for loan “evergreening”.     

信贷融资约束对员工收入的影响-来自我国企业微观层面的经验证据

文章运用世行《中国投资环境调查》(2005年)中对2004年我国12400家企业的调查数据,实证分析了我国制造业企业信贷融资约束对员工收入的影响.研究结果表明,我国企业所存在的信贷融资约束总体而言会显著地降低员工收入水平,即使是在未获得贷款企业内部,该负向作用仍然显著存在.稳健性检验表明,融资约束对员工收入的负影响这一结论并不随融资约束度量指标、估计模型设定以及融资约束的内生性问题而发生改变.进一步研究表明,短期内企业信贷融资约束对员工收入的显著负向作用由前者对企业劳动生产率的显著抑制作用直接导致,并且该负向作用在非正规雇佣比重高的企业中更为明显,因为非正规雇佣比重高的企业所存在的信贷融资约束还会显著降低企业的劳动力需求,从而使员工收入进一步减少.本文的研究成果为从完善金融体系、提高金融发展水平方面改善劳动力收入提供了经验支持.     

Investment and Finance in de novo private firms: Empirical Results from the Czech Republic, Hungary and Poland

In this paper we use a survey of 281 Czech, Hungarian and Polish newly-established small private firms in order to shed some light on the constraints these firms face in the credit market. The results of our survey show that imperfections in capital markets in Central European economies do not seem to actually inhibit the growth of new private firms. Credit markets do exist for de novo private firms in the three Central European transition economies studied, and they provide quite a large amount of financing from an early stage of the existence of firms. Financial intermediation works reasonably well as far as de novo private firms are concerned: loss-making de novo firms have a lower probability of getting credit than profitable ones. Banks protect themselves against the risk of a deteriorating pool of borrowers by requiring collateral for their loans. We do not find convincing evidence concerning the existence of adverse selection. Loss-making firms are not ready to pay higher interest rates than profitable firms and are not more likely to ask for credit than profitable firms.     

Credit constraints in Italian industrial districts

Italy is characterized by strong differences both in the productive and in the financial structure. Small and medium firms tend to concentrate in the so called ‘Marshallian industrial district’, whose productive system has been thoroughly studied but whose financial features are partially overlooked. This paper aims at investigating how the location of a firm in an industrial district affects its ability to resort to external finance, mostly bank loans. The econometric analysis on a panel of 1700 firms over the 1989–1995 period shows that firms located inside industrial districts have an advantage in terms of financial relations with the banking system: both the cost of credit and the probability to face financial constraints are lower. Nevertheless, the cyclical pattern of this advantage is not in favour of district firms: following the tightening of monetary policy, increases in interest rates on bank loans are proportionally higher for firms inside the district; furthermore, also the advantage consisting in an easier access to credit market disappears after the 1992–1993 recession.     

The Macroeconomic Implications of Regulatory Capital Adequacy Requirements for Korean Banks

The capital adequacy requirement, combined with the flight to quality, contributed to a drastic credit slowdown and a sharp recession in Korea in the aftermath of the financial crisis. Since most banks were placed under the strengthened capital adequacy constraints, they reduced loans to firms with high credit risks. As a result, bank-dependent small and medium-sized enterprises (SMEs) were badly hit, and eventually demand for bank loans fell. The reduction in loans was most visible among banks with poor capital adequacy, yet the overall change in bank portfolios had a disproportionately large negative influence on financial conditions for SMEs. In conclusion, the banks' response to capital adequacy requirements resulted in changes in the loan/bond ratio which, in turn, reduced loans to SMEs and caused a sharp cut in production. The resulting contraction in SME production created a polarized industrial structure and a chronic depression in the traditional sectors of the economy. The introduction of capital adequacy requirements (CARs) in the wake of financial crisis worsened conditions for SMEs and weakened the validity of the CARs that were mainly necessitated by successive failures among larger firms.     

Changes in income inequality and the black market premium

Italian firms are top users of trade credit in an international comparison. The paper offers some clues to the determinants of this stylized fact exploiting the answers of about 1900 manufacturing firms on a wide range of contractual features, separately for domestic and foreign customers. The main finding of the univariate analysis is that, with the almost totality of transactions made on credit, there is no evidence that this way of financing is more expensive than loans. An econometric investigation shows that discounts offered have the expected effect of reducing payment delays mostly for customers located abroad, where customary credit periods are shorter and creditors’ rights protection is more effective. The result is consistent with the poor explanatory power of discounts received in regressions for the trade debt period of domestic firms.     

Credit rationing or overlending? An exploration into financing imperfection

Small and new firms are deemed to be unable to obtain sufficient bank loans. This idea finds a strong theoretical support in credit rationing theory. However, this is vigorously challenged by De Meza and Webb (1987, 2000) suggesting that firms can benefit from an excess of credit, i.e. overlending. Credit rationing or overlending? The contribution of this empirical article is twofold: to our knowledge, it is the first to make an attempt in measuring the relative importance of these two types of financing imperfection and to explore factors leading to one or the other. We exploit a rich panel data set on the access to bank credit for new French businesses during the mid-1990s. Our results show that credit rationing was not highly spread among French new firms. The story told by De Meza and Webb (1987) appears to be a much more realistic model. In addition, we identify factors, linked to the starter, the project or the industry, that are closely associated with credit rationing and/or overlending. Most factors enter into a consistent relation: when they are positively (negatively) associated with credit rationing, they are negatively (positively) associated with overlending.     

券商质押贷款融资的风险平衡设计

券商的资金缺口是一种超额信贷资金缺口,这种缺口主要是由券商的超额风险产生的。通过券商质押贷款,一方面可以解决券商的超额资金缺口;另一方面也可以有效地平衡风险,关键在于进行有效的风险平衡设计。     

Effects of bank insolvency on corporate incentives in transition economies

In transition countries, the real impact of banking crises has so far been rather moderate. We study the effect of bank insolvency on corporate incentives in a model where incumbent banks possess an informational advantage. We find that bank insolvency reduces the incentive to restructure for firms whose incumbent bank becomes insolvent. However, bank insolvency provides an additional incentive for firms that enter the credit market to develop new projects because it reduces asymmetric information between banks. Firms’ credit costs are thereby lowered. We also explain a path‐dependent development by demonstrating that the firms’ decision to develop new projects depends on the banks’ share of non‐performing loans.     

A micro data approach to the identification of credit crunches

This article presents a micro data approach to the identification of credit crunches. Using a survey among German firms which regularly queries the firms' assessment of the current willingness of banks to extend credit, we estimate the probability of a restrictive loan supply policy by time taking into account the creditworthiness of borrowers. Creditworthiness is approximated by firm-specific factors, e.g. the firms' assessment of their current business situation and their business expectations. After controlling for the return on the banks' risk-free investment alternative, which is also likely to affect the supply of loans, we derive a credit crunch indicator, which measures that part of the shift in the loan supply that is neither explained by firm-specific factors nor by the opportunity costs of providing risky loans.     

Why the money multiplier has remained persistently so low in the post-crisis United States?

The money multiplier collapsed in the USA in the wake of the Lehman crisis, and since then it remained at particularly low levels. The main reason for this collapse is to be found in the significant increase in banks’ excess reserves and the modest increase in deposits. The weak growth of deposits resulted from a contained growth of loans. Most scholars attribute the latter to the low propensity of banks to grant credit. Using quarterly data for the period 1991–2017 we estimate a demand for loans by firms and households. We show that the modest increase in deposits and the persistence of low levels of the US money multiplier has been due to the weak demand for loans by the private sector.     

Financing R&D in Chinese private firms: Business associations or political connection?

Using a new and unique dataset of Chinese private firms, this paper explores how private firms access bank loans to finance innovative activities. The results reveal that political connection, rather than membership in a government-controlled business association, largely determines private firms' innovations by providing access to bank loans. Furthermore, the “grease-the-wheels” mechanism of political connection is stronger if the firms are more constrained financially, located in regions with low levels of financial development, or located in regions with relatively under-developed institutional environments. Finally, cash flow, used to measure internal financing, and trade credit, used to measure informal financing, are important alternative financing channels and support firms' R&D investments. Our paper implies that China's government needs to continue fostering a good financing environment and supporting innovation activities.