Bank market concentration, relationship banking, and small business liquidity

Han, Liang; Zhang, Song; Greene, Francis J.

doi:10.1177/0266242615618733

Cited by 48 publications

(14 citation statements)

References 69 publications

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“…However, although the banking theories can have contrasting predictions (e.g. MPH vs. IBH), similar to Han et al (2017), we have shown that theories are not always mutually exclusive to each other as we find that banks with greater market power are also more likely to engage in relationship lending and reduce the information barriers between borrowers and lenders. The policy implication is that when promoting bank competition, policymakers must also pay attention to supporting SMEs' access to finance by reducing information barriers and building tailored relationship.…”

Section: Resultssupporting

confidence: 68%

“…Di Patti and Dell'Ariccia, 2004;Cetorelli and Gambera, 2011) or two contrasting hypotheses could coexist (e.g. Han et al, 2017). Carbo-Valverde et al (2009), for example, show that market power is negatively related to credit availability only when the Lerner Index is used but concentration ratio presents opposite conclusion.…”

Section: Bank Market Power and Sme Financementioning

confidence: 99%

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Bank market power and SME finance: Firm-bank evidence from European countries

Wang

Han

Huang

2020

Journal of International Financial Markets, Institutions and Mo

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Using unique matched data on SME-bank relationships from 19 European countries, we examine the effects of bank-level market power on SME finance. We show novel evidence that bank market power at disaggregate level reduces SMEs' access to bank finance and worsens their credit constraints. Whilst, banking market concentration improves credit supply to SMEs. The unfavourable market power effect is stronger for SMEs who are more informationally opaque, riskier and more dependent on external finance. We also show supporting evidence on Information-based Hypothesis where with greater market power, banks are more likely to engage in relationship lending.

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Section: Resultssupporting

confidence: 68%

Section: Bank Market Power and Sme Financementioning

confidence: 99%

Bank market power and SME finance: Firm-bank evidence from European countries

Wang

Han

Huang

2020

Journal of International Financial Markets, Institutions and Mo

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“…Arena and Dewally (2012) argued that firms in rural areas have a cost disadvantage in credit markets, facing higher debt yield spreads, but are more likely to rely on relationship banking, repeatedly borrowing from the same banks. Relationship banking (Han et al, 2017;Hasan et al, 2017) seems to be particularly important in less-urbanized areas, where interactions between loan officers and firm managers tend to be more frequent and fruitful, leading to the collection of better soft information. The main benefit of building close ties between firms and creditors is the availability of financing increases (Petersen and Rajan, 1994).…”

Section: Geographical Locationmentioning

confidence: 99%

The impact of family ownership on capital structure of firms: Exploring the role of zero-leverage, size, location and the global financial crisis

Ramalho

Rita

Silva

2018

International Small Business Journal

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In this article, we investigate the influence of family ownership on firm leverage across different subgroups of family and non-family firms. In addition, we examine the influence of firm size, geographical location and the 2008 global financial crisis on the capital structure of family firms. In both cases, we study the probability of firms using debt and, conditional on its use, the proportion of debt issued. We find that family ownership affects both decisions positively, namely, when the firm is large or located in a metropolitan area. For small firms located outside metropolitan areas, there is no clear family ownership effect. We also find the 2008 crisis had a substantial, but diversified, impact on family firm leverage. On the one hand, all family firms were more prone to use debt after 2008; on the other, the proportion of debt held by levered family firms decreased for micro and small firms, but increased for large firms. Overall, the crisis effects on family firm leverage seem to be the result of both supply-and demand-side factors, with the former particularly affecting the availability of debt to micro and small firms.

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“…This implies that it is possible for competition to reduce credit availability, which is consistent with the information hypothesis, arguing that increased bank competition strengthens financing obstacles and drives up lending rates. In support of market power hypothesis, Han, Zhang, and Greene (2015) showed that in a highly concentrated banking market, small firms hold less cash, have less access to lines of credit, and are more likely to be financially constrained, use greater amounts of more expensive trade credit, and face higher penalties for trade credit late payment. Their study also found support for the information hypothesis.…”

Section: Brief Literature Reviewmentioning

confidence: 99%

Remittances, Bank Concentration and Credit Availability in Nigeria

Ajide

2019

Journal of Development Policy and Practice

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The concentration of the Nigerian financial sector has long been recognised to be an important factor affecting the financial stability and welfare at an individual level in the economy. While various studies have been conducted to examine the sensitivity of this phenomenon to macro economy, little has been done to examine the effect of concentration on credit availability in Nigeria. In addition, no study has investigated the role of remittances on the relationship between bank concentration and availability of credit. Taking motivation from the Nigerian banking consolidation exercise, this article examined the effect of remittances and bank concentration on availability of credit in Nigeria. The author employed the autoregressive distributed lag (ARDL) bound test approach for co-integration on Nigerian data for the period of 1986-2015. The results revealed that bank concentration constrains the development of financial sector in Nigeria and remittances improve the level of financial development (credit availability) in the long run but inhibit the availability of credit in the short run. The negative relationship occurs in the short run because of the regulatory framework governing international money transfers in Nigeria, which simply inhibits competition. In the long run, recipients who have received remittances from informal settings would need financial products and services in which those remittances would be banked and further improve the financial sector. It was concluded that since Nigerian financial sector remained underdeveloped, the sector could be driven by encouraging inflow of remittances into the country. Our findings also persist after batteries of robustness check.

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Bank market concentration, relationship banking, and small business liquidity

Cited by 48 publications

References 69 publications

Bank market power and SME finance: Firm-bank evidence from European countries

Bank market power and SME finance: Firm-bank evidence from European countries

The impact of family ownership on capital structure of firms: Exploring the role of zero-leverage, size, location and the global financial crisis

Remittances, Bank Concentration and Credit Availability in Nigeria

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