The ability of banks to lend to informationally opaque small businesses |
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| Authors: | Allen N Berger Leora F Klapper Gregory F Udell |
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| Institution: | 1. Brazilian School of Public and Business Administration, Getulio Vargas Foundation, Praia de Botafogo 190, 22250-900 Rio de Janeiro, Brazil;2. Deutsche Bundesbank, Wilhelm-Epstein-Straße 14, 60431 Frankfurt am Main, Germany;1. Fordham University, United States; Bank of Finland, Finland; and University of Sydney, Australia;2. Department of Banking, Insurance and Risk, Kozminski University, Jagiellonska 59, 03-301 Warsaw, Poland;3. National Bank of Poland, Poland;4. IESEG School of Management, Paris, France;5. LEM-CNRS 9221, Lille, France;1. Bank for International Settlements, Centralbahnplatz 2, CH-4002 Basel, Switzerland;2. Bank for International Settlements and CEPR, Centralbahnplatz 2, CH-4002 Basel, Switzerland;3. Banca d''Italia, Via Nazionale 91, 00100 Rome, Italy;1. School of Finance, Renmin University of China, PR China;2. Institute of Finance and Economics, Shanghai University of Finance and Economics, PR China |
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| Abstract: | We test hypotheses about the effects of bank size, foreign ownership, and distress on lending to informationally opaque small firms using a rich new data set on Argentinean banks, firms, and loans. We also test hypotheses about borrowing from a single bank versus multiple banks. Our results suggest that large and foreign-owned institutions may have difficulty extending relationship loans to opaque small firms. Bank distress appears to have no greater effect on small borrowers than on large borrowers, although even small firms may react to bank distress by borrowing from multiple banks, raising borrowing costs and destroying some relationship benefits. |
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| Keywords: | Banks Mergers Foreign ownership Financial distress Multiple lenders |
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