A more complete conceptual framework for SME finance

Berger, Allen N.; Udell, Gregory F.

doi:10.1016/j.jbankfin.2006.05.008

Cited by 1,441 publications

(1,123 citation statements)

References 102 publications

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“…More recently, the new Basel Accord for bank capital adequacy (Basel II) has seen many analysts focus on the SME segment (see for example Schwaiger (2002), Saurina and Trucharte (2004), Udell (2004), Berger (2004), Jacobson et al (2004), and Altman and Sabato (2005)). Actually, criticisms have been raised by governments and SME associations that high capital charges for SMEs could lead to credit rationing of small firms and, given the importance of these firms in the economy, could reduce economic growth.…”

Section: Sme Studiesmentioning

confidence: 99%

“…The aforementioned studies have dealt with the problem of the possible effects of Basel II on bank capital requirements, but the problem of modeling credit risk specifically for SMEs has either not been addressed or only briefly considered. Other authors have focused on the difficulties and the potentials of small business lending, investigating the key drivers of SME profitability and riskiness for US banks (Kolari and Shin (2004)) or the lending structures and strategies (Berger and Udell (2004)). Recently, Berger and Frame (2005) have analyzed the potential effects of the small business credit scoring on credit availability.…”

Section: Sme Studiesmentioning

confidence: 99%

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Modeling Credit Risk for SMEs: Evidence from the US Market

Altman

Sabato²

2005

SSRN Journal

124

217

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Considering the fundamental role played by small and medium sized enterprises (SMEs) in the economy of many countries and the considerable attention placed on SMEs in the new Basel Capital Accord, we develop a distress prediction model specifically for the SME sector and to analyze its effectiveness compared to a generic corporate model. The behaviour of financial measures for SMEs is analyzed and the most significant variables in predicting the entities' credit worthiness are selected in order to construct a default prediction model. Using a logit regression technique on panel data of over 2,000 US firms (with sales less than $65 million) over the period 1994-2002, we develop a one-year default prediction model. This model has an out-of-sample prediction power which is almost 30 percent higher than a generic corporate model. An associated objective is to observe our model's ability to lower bank capital requirements considering the new Basel Capital Accord's rules for SMEs. JEL classification: G21; G28

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Section: Sme Studiesmentioning

confidence: 99%

Section: Sme Studiesmentioning

confidence: 99%

Modeling Credit Risk for SMEs: Evidence from the US Market

Altman

Sabato²

2005

SSRN Journal

124

217

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“…Audited statements allow banks to underwrite loans primarily based on …nancial statement ratios and covenants associated with those ratios (Berger and Udell, 2006). Information opacity is thus related to ex ante risk because unaudited statements (i.e., …nancial statements that have not been veri…ed by an external auditor) have a much higher risk of material misstatment (e.g., Blackwell, Noland, and Winters, 1998; Allee and Yohn, 2009).…”

Section: Bank Lending Standards and Risk Taking: Firm Opacitymentioning

confidence: 99%

“…Finally, the equation is estimated using a probit model. 13 The main parameter of interest in the model is 2 , which measures the e¤ect of home-country regulation and supervision on host-country lending standards de…ned as lending to informationally opaque …rms. We construct the home-country bank regulation index by aggregating data on homecountry regulation and supervision after determining which banks are present in each locality in each host country, as well as the parent bank of each bank in each locality.…”

Section: Bank Lending Standards and Risk Taking: Firm Opacitymentioning

confidence: 99%

“…The probability of desiring credit is higher for exporters, potentially due to their faster expansion, and is lower for non-audited …rms, which might simply imply that …rms choose to be audited (i.e., they are willing to pay for transparency) when they plan to apply for bank credit. 16 It may also be the case that audited …rms have access to …nancial statement lending which may be a cheaper lending technology (Berger and Udell, 2006). Finally, innovative …rms tend to have a higher demand for credit.…”

Section: First-stage Regressionsmentioning

confidence: 99%

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'When the Cat's Away the Mice Will Play': Does Regulation at Home Affect Bank Risk Taking Abroad?

2012

Self Cite

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Terms of use: Documents in EconStor may Macroprudential Research NetworkThis paper presents research conducted within the Macroprudential Research Network (MaRs). The network is composed of economists from the European System of Central Banks (ESCB), i.e. the 27 national central banks of the European Union (EU) and the European Central Bank. The objective of MaRs is to develop core conceptual frameworks, models and/or tools supporting macro-prudential supervision in the EU. The research is carried out in three work streams: 1) Macro-financial models linking financial stability and the performance of the economy; 2) Early warning systems and systemic risk indicators; 3) Assessing contagion risks. MaRs is chaired by Philipp Hartmann (ECB). Paolo Angelini (Banca d'Italia), Laurent Clerc (Banque de France), Carsten Detken (ECB), Cornelia Holthausen (ECB) and Katerina Šmídková (Czech National Bank) are workstream coordinators. Xavier Freixas (Universitat Pompeu Fabra) and Hans Degryse (Katholieke Universiteit Leuven and Tilburg University) act as external consultant. Angela Maddaloni (ECB) and Kalin Nikolov (ECB) share responsibility for the MaRs Secretariat. The refereeing process of this paper has been coordinated by a team composed of Cornelia Holthausen, Kalin Nikolov and Bernd Schwaab (all ECB). The paper is released in order to make the research of MaRs generally available, in preliminary form, to encourage comments and suggestions prior to final publication. The views expressed in the paper are the ones of the author(s) and do not necessarily reflect those of the ECB or of the ESCB. This paper provides the …rst empirical evidence that bank regulation is associated with cross-border spillover e¤ects through the lending activities of large multinational banks. We analyze business lending by 155 banks to 9613 …rms in 1976 di¤erent localities across 16 countries. We …nd that lower barriers to entry, tighter restrictions on bank activities, and higher minimum capital requirements in domestic markets are associated with lower bank lending standards abroad. The e¤ects are stronger when banks are less e¢ ciently supervised at home, and are observed to exist independently from the impact of host-country regulation. AcknowledgementsJEL classi…cation: G21, G28, G32. Keywords: bank regulation, cross-border …nancial institutions, lending standards, …nancial risk. 1 Non-technical summaryDoes the strictness of home-country bank regulation and supervision affect lendi...

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Twelve Meditations on Venture Capital: Some Heretical Observations on the Dissonance Between Theory and Practice When Applied to Public/Private Collaborations on Entrepreneurial Finance Policy

Murray

Lingelbach

2010

Venture Capital

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This paper reflects on the policy formation process in the burgeoning area of venture capital finance. An important question is raised as to why so little extant academic research, of both rigor and relevance, is employed in policy formation. The authors argue that the long term, international and comparative perspective of the academic researcher is of increasing importance in government. The gap between policy practice and academic empiricism is illustrated by reference to contemporary policy interest in the creation of public/private ('hybrid') venture capital funds. The rubric of 12 Meditations is employed as a device to communicate across the academic/policy maker divide.

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A more complete conceptual framework for SME finance

Cited by 1,441 publications

References 102 publications

Modeling Credit Risk for SMEs: Evidence from the US Market

Modeling Credit Risk for SMEs: Evidence from the US Market

'When the Cat's Away the Mice Will Play': Does Regulation at Home Affect Bank Risk Taking Abroad?

Twelve Meditations on Venture Capital: Some Heretical Observations on the Dissonance Between Theory and Practice When Applied to Public/Private Collaborations on Entrepreneurial Finance Policy

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