Information asymmetry,external certification,and the cost of bank debt

This paper examines how the cost of bank debt reflects public information about borrower quality, and whether such information complements or substitutes the private information of banks. Using a sample of small business loans, and the award of a competitive public subsidy as an observable positive signal of external certification, we find that certification is associated with a lower cost of debt for subsidy recipients if the amount of private information of the lender is limited or the local credit market is less competitive. Public information loses importance once the bank accumulates information over the course of the lending relationship or the credit market is more competitive. Our results highlight a positive effect of external certification, driven by the signal it provides to both the lending bank and its competitors, and suggest that public and private information can be substitutes in the pricing of bank debt.     

Tax avoidance and the cost of debt for SMEs: Evidence from Spain

We investigate the effect of tax avoidance on the cost of debt for SMEs. Tax avoidance may increase a firm’s cash flows on one hand, but also increase the agency costs, the information risk, and the risk of scrutiny by tax authorities on the other, affecting the cost of debt in opposing ways. Using a sample of Spanish SMEs for the period 2007–2019, our findings show that tax-avoiding SMEs face lower debt costs, suggesting that the positive effects of tax avoidance prevail over the negative ones for SMEs. This finding is consistent with a more favourable assessment of SMEs’ tax avoidance activities by their key finance providers (banks), given SME unique characteristics and their lower agency costs.     

关系型借贷对中小企业融资成本的影响——基于广西中小企业调查的实证研究

文章在研究关系型借贷理论的基础上,分析了中小企业的关系型借贷与融资成本之间的关系,通过构建计量经济模型实证研究了合作的银行数量、银企合作时间、企业的人情消费和银企关系的满意度等因素对中小企业融资成本的影响.研究发现：银企关系的满意度和企业销售额与贷款利率呈显著的负相关关系;银企合作时间等其他因素符合假设但并不显著.最后,从企业、银行和政府的角度,提出了降低中小企业融资成本的相关政策建议.     

Does bank market power affect SME financing constraints?

This paper examines the extent to which bank market power alleviates or magnifies SME credit constraints using a large panel dataset of more than 118,000 SMEs across 20 European countries over the period 2005–2008. To our knowledge, this is the first study to examine bank market power and SME credit constraints in an international, developed economy setting. Moreover, our study is the first to address a number of econometric considerations simultaneously, in particular by controlling for the availability of profitable investment opportunities using a structural Q model of investment. Our results strongly support the market power hypothesis, namely, that increased market power results in increased financing constraints for SMEs. Additionally, we find that the relationship exhibits heterogeneity across firm size and opacity in a manner that suggests that the true relationship between bank market power and financing constraints might not be fully explained by the existing theory. Finally, we find that the effect of bank market power on financing constraints increases in financial systems that are more bank dependent.     

内源融资能力、资本结构对信贷融资成本的影响--基于中小企业的实证研究

论文以中小上市企业自身内源融资能力、资本结构因素为观察点,以中小上市企业信贷融资成本为研究对象,选择2007-2013年共7年的深市中小板55家上市公司作为研究样本,实证分析了中小企业内源融资能力、资本结构对中小企业信贷融资成本的影响。结果显示中小企业的内源融资能力越强,资本结构对债务融资的依赖性越弱,中小企业的信贷融资成本越低。因此中小企业应提高自身的内源融资能力,优化资本结构,从而降低自身信贷融资成本。     

Corporate Tax Enforcement Externalities and the Banking Sector

We explore whether corporate tax enforcement can affect bank lending. Specifically, we hypothesize that tax enforcement efforts aimed at small and midsized enterprises (SME) can improve their information environments, which in turn could lead to increased bank commercial lending. Exploiting the regional structure employed by the IRS until 1999, we find that the corporate tax return audit probability for SMEs is associated with greater commercial lending growth for regionally focused banks. We find similar evidence when exploiting the IRS reorganization from a regional to federal system in 2000. Further results show that tax enforcement's impact on SME informational environments is at least partially responsible for this association: The impact of tax auditing on bank lending is stronger for banks facing greater informational disadvantages and in areas where SMEs face greater hold-up problems. Finally, we find that the tax audit rate is positively associated with loan portfolio quality, suggesting that tax enforcement can lead to better loan decisions. Our findings are consistent with the tax authority's mandate having important externalities on bank lending and SME access to capital, suggesting that the benefits to tax enforcement go beyond improving tax collection.     

SME financing and the choice of lending technology in Italy: Complementarity or substitutability?

This paper investigates SME financing in Italy. The literature distinguishes between two main different lending technologies (LTs) for SMEs: transactional and relationship LTs. We find that banks lend to SMEs by using both LTs together, independently of the size and proximity of borrowers. Moreover, we show that the use of soft information decreases the probability of firms being credit rationed. Finally, we find that more soft information is produced when the bank uses relationship LT as primary technology individually or coupled with transactional LT. Our results support the view that LTs can be complementary, but reject the hypothesis that substitutability among LTs is somehow possible for outsiders by means of hardening of soft information.     

The role of venture capital in SME loans in China

We examine the role of venture capital (VC) in small and medium-sized enterprise (SME) loans through samples on the National Equities Exchange and Quotations (NEEQ) in China. We find that VC backup can effectively improve SMEs’ access to bank loans, especially short-term loans, at lower costs, and loans without collateral. VC backed loans are also less likely to default and positively related to SMEs’ performance. Our findings further suggest that VC backup reduces the information asymmetry between banks and SMEs through both “hard” information of better-quality financial statement and “soft” information of SMEs’ creditability. Evidenced by enhanced SME financing conditions and bank efficiency in loan allocation, the combined debt-equity financing scheme can be a meaningful new ingredient in the financial infrastructure of the largest emerging market.     

中小企业信贷可得性的影响因素

本文利用中国人民银行征信系统的相关数据,实证研究湖南地区中小企业信贷可得性的影响因素,以检验银行对中小企业的贷款技术。实证结果表明:大型和跨区域性银行对中小企业未采取关系型贷款;贷款银行对中小企业的财务特征不太重视;大型和跨区域性银行对中小企业贷款主要采用信用评分技术。作者建议:第一,整合信息资源,发展独立的信用评估机构对中小企业进行信用评估,降低大型和跨区域性银行对中小企业贷款成本和信息不对称程度;第二,大力发展区域性中小商业银行,并鼓励其形成和充分发挥对中小企业进行关系型贷款的比较优势。     

Do local banking market structures matter for SME financing and performance? New evidence from an emerging economy

This paper investigates the relationship between local banking structures and SMEs’ access to debt and performance. Using a unique dataset on bank branch locations in Poland and firm-, county-, and bank-level data, we conclude that a strong position for local cooperative banks facilitates access to bank financing, lowers financial costs, boosts investments, and favours growth for SMEs. Moreover, counties in which cooperative banks hold a strong position are characterized by a more rapid pace of new firm creation. The opposite effects appear in the majority of cases for local banking markets dominated by foreign-owned banks. Consequently, our findings are important from a policy perspective because they show that foreign bank entry and industry consolidation may raise valid concerns for SME prospects in emerging economies.     

A more complete conceptual framework for SME finance

We propose a more complete conceptual framework for analysis of SME credit availability issues. In this framework, lending technologies are the key conduit through which government policies and national financial structures affect credit availability. We emphasize a causal chain from policy to financial structures, which affect the feasibility and profitability of different lending technologies. These technologies, in turn, have important effects on SME credit availability. Financial structures include the presence of different financial institution types and the conditions under which they operate. Lending technologies include several transactions technologies plus relationship lending. We argue that the framework implicit in most of the literature is oversimplified, neglects key elements of the chain, and often yields misleading conclusions. A common oversimplification is the treatment of transactions technologies as a homogeneous group, unsuitable for serving informationally opaque SMEs, and a frequent misleading conclusion is that large institutions are disadvantaged in lending to opaque SMEs.     

Bank Equity Investments: Reducing Agency Costs or Buying Undervalued Firms? The Information Effects

Abstract:   This paper analyses the relevance of two different reasons for banks to acquire firms' stock: the increase of agency costs in the lending relationship (the agency costs hypothesis), and participation in the expected profits of undervalued firms (the information asymmetry hypothesis). Results indicate not only that banks make equity investments for both reasons but also that the market exploits their lending decisions to learn which of the two motivations was in play. Bank equity investments concurrent with reductions in bank debt are consistent with the agency costs hypothesis, whereas bank equity investments concurrent with increases in bank debt are consistent with the information asymmetry hypothesis.     

Financial constraints of private firms and bank lending behavior

We investigate whether and how financial constraints of private firms depend on bank lending behavior. Bank lending behavior, especially its scale, scope and timing, is largely driven by bank business models which differ between privately owned and state-owned banks. Using a unique dataset on private small and medium-sized enterprises (SMEs) we find that an increase in relative borrowings from local state-owned banks significantly reduces firms’ financial constraints, while there is no such effect for privately owned banks. Improved credit availability and private information production are the main channels that explain our result. We also show that the lending behavior of local state-owned banks can be sustainable because it is less cyclical and neither leads to more risk taking nor underperformance.     

Why do small businesses have difficulty in accessing bank financing?

This study investigates bank financing to small and medium-size enterprises (SMEs) and evaluates whether the difficulties of SMEs in accessing bank financing during a period of financial crisis are due to a reduction in the supply of credit, or to a decrease in the demand for credit. The results show that the macroeconomic setting matters: demand effects are unlikely to drive the decline in the stock of bank loans, while the supply of credit causes SMEs difficulties in accessing bank credit. During a crisis period, in particular, an increase in the risk of lenders leads to the reduced supply of credit and credit rationing (i.e. the bank lending channel). In a post-crisis period, SMEs with increased risk and decreased profits have great difficulties in securing bank loans (i.e. the borrower balance sheet channel). Taken together, these results suggest that supply effects initially emerge through the bank-lending channel and then shift to the borrower balance sheet channel over a period of financial crisis.     

The impact of monetary policy on the financing behaviour of firms in the Euro area and the UK

Abstract

According to the ‘broad credit view’ bank-dependent firms are more strongly affected by monetary contractions than firms with access to non-bank forms of external finance. Within the credit view the bank lending channel focuses on the special role of bank loans, and predicts that monetary contractions reduce loan supply to firms facing information problems. However, the ‘relationship lending channel’ argues that, especially in bank-based economies, bank-dependent firms have close ties with banks, which may reduce the sensitivity of their use of bank debt to monetary shocks. The sensitivity of corporate debt structures to changes in the monetary policy stance is analysed using a sample of 22,000 firms in the Euro area and the UK. Evidence is found for the credit view, the relationship lending channel, but not for the bank lending channel.     

Bank market power,factor reallocation,and aggregate growth

Using a unique firm-level sample of approximately 700,000 firm-year observations of German small and medium-sized enterprises (SMEs), this study seeks to identify the effect of bank market power on aggregate growth components. We test for a pre-crisis sample whether bank market power spurs or hinders the reallocation of resources across informationally opaque firms. Identification relies on the dependence on external finance in each industry and the regional demarcation of regional banking markets in Germany. The results show that bank markups spur aggregate SME growth, primarily through technical change and the reallocation of resources. Banks seem to need sufficient markups to generate the necessary private information to allocate financial funds efficiently.     

关系型借贷与中小企业融资

基于三家国内股份制银行中小企业客户的随机调查结果,本文验证了关系型借贷已经成为中小企业与银行之间信贷的一般方法。股份制银行已经超过国有商业银行成为中小企业银行借贷的主体,这证明了小银行优势假说在中国的适用。本研究证明中小企业的最大贷款金额基本上是在企业规模基础上,由企业自身的情况和企业与银行的关系共同决定的,与银行的关系越紧密,获得的贷款额度越高,价格越便宜。国家应在政策方面支持中小型银行的发展及对银行关系型借贷产品的开发,以在最短时间、最大程度上满足中小企业的融资需求。     

Bank lending during the financial crisis of 2008

This paper shows that new loans to large borrowers fell by 47% during the peak period of the financial crisis (fourth quarter of 2008) relative to the prior quarter and by 79% relative to the peak of the credit boom (second quarter of 2007). New lending for real investment (such as working capital and capital expenditures) fell by only 14% in the last quarter of 2008, but contracted nearly as much as new lending for restructuring (LBOs, M&As, share repurchases) relative to the peak of the credit boom. After the failure of Lehman Brothers in September 2008, there was a run by short-term bank creditors, making it difficult for banks to roll over their short term debt. We find that there was a simultaneous run by borrowers who drew down their credit lines, leading to a spike in commercial and industrial loans reported on bank balance sheets. We examine whether these two stresses on bank liquidity led them to cut lending. In particular, we show that banks cut their lending less if they had better access to deposit financing and thus, they were not as reliant on short-term debt. We also show that banks that were more vulnerable to credit-line drawdowns because they co-syndicated more of their credit lines with Lehman Brothers reduced their lending to a greater extent.     

Credit information,consolidation and credit market performance: Bank-level evidence from developing countries

Paying particular attention to the degree of banking market concentration in developing countries, this paper examines the effect of credit information sharing on bank lending. Using bank-level data from African countries over the period 2004 to 2009 and a dynamic two-step system generalised method of moments (GMM) estimation, it is found that credit information sharing increases bank lending. The degree of banking market concentration moderates the effect of credit information sharing on bank lending. The results are robust to controlling for possible interactions between credit information sharing and governance.     

Small Business Reliance on Bank Financing in Ghana

Financing has been identified as a dominant constraint to Ghanaian small and medium-sized enterprises (SMEs). This study explores the determinants of bank financing and debt among Ghanaian SMEs. A panel regression model estimates the relation between the determinants and the bank-debt ratio. The results reveal that bank loans account for less than a quarter of SMEs' total debt financing, and show that the age and size of the firm, along with asset tangibility, have significantly positive associations with the bank-debt ratio. Profitability is significantly and negatively related to the bank-debt ratio. These findings have significant implications both at the firm level and for the support of policies aimed at improving SME financing in Ghana.