Credit rationing and relationship lending. Does firm size matter?

Cenni, Stefano; Monferrà, Stefano; Salotti, Valentina; Sangiorgi, Marco; Torluccio, Giuseppe

doi:10.1016/j.jbankfin.2014.12.010

Cited by 128 publications

(129 citation statements)

References 68 publications

(52 reference statements)

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“…From a bank-borrower relationship point of view, older firms can make a long-term relationship with banks which is less likely for the younger firms. Thus, based on the relationship banking, older firms can receive more credit from banks (Comeig et al, 2015;Cenni et al, 2015;Uchida et al, 2012;Bolton et al, 2013). Bearing in mind the above-mentioned literature, we hypothesised that there may be a positive relationship between firm age and access to bank finance.…”

Section: Literature Review and Hypothesesmentioning

confidence: 96%

“…Studies used firm size as a proxy for better credit quality and showed that it can positively affect the access to credit (Cenni et al, 2015;Hernandez-Canovas and Martinez-Solano, 2010;Cole, 1998). As the firm gets larger, it can acquire more tangible assets that can be useful for banks in assessing the credit risk of the firm (Gompers, 1995).…”

Section: Literature Review and Hypothesesmentioning

confidence: 99%

“…As the firm gets larger, it can acquire more tangible assets that can be useful for banks in assessing the credit risk of the firm (Gompers, 1995). At the same time, large firms can gain more bargaining power and they can negotiate with banks the credit terms which may facilitate loans with fewer restrictions and larger loan sizes (Cenni et al, 2015). Brancati (2015) showed that micro firms in the Italian market are more credit constrained than the small or medium firms as information opacity is even more severe for the micro firms.…”

Section: Literature Review and Hypothesesmentioning

confidence: 99%

See 2 more Smart Citations

Determinants of SME Finance: Evidence from Three Central European Countries

Rahman

Belás

2017

Review of Economic Perspectives

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This paper explores the determinants of access to finance for small and medium enterprises (SMEs) in the context of three Central European countries: Czech Republic, Slovak Republic, and Hungary. The data set of the research is obtained from the BEEPS survey, which is conducted by the World Bank and the European Bank for Reconstruction and Development. This paper empirically analyses firms not only from the SMEs point of view, but also shows results for micro, small and medium enterprises separately. Additionally, we have analysed the determinants of access to finance for SMEs at each country level for an in-depth understanding of country-level variations in SME financing. The results indicate that micro firms and firms owned and operated by women are experiencing a shortage of credits from banks. On the other hand, we found a positive relationship between the pledge of collateral and access to finance. With respect to the medium firms, we found evidence that innovative firms have a larger amount of credit from banks. The empirical results also suggest that the loan size increases as the interest rates increase in particular for SMEs on the whole and for micro-firms, although the interest rate is in a negative relationship with the loan size in Czech Republic.

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Section: Literature Review and Hypothesesmentioning

confidence: 96%

Section: Literature Review and Hypothesesmentioning

confidence: 99%

Section: Literature Review and Hypothesesmentioning

confidence: 99%

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Determinants of SME Finance: Evidence from Three Central European Countries

Rahman

Belás

2017

Review of Economic Perspectives

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“…Credit rationing is a process that occurs when banks are operating under rather serious financial stress. [17] In essence, when banks experience trouble financing themselves as an institution, they are forced to ration their credits. [17] Following the analysis of the Stigliz-Weiss a 1981 rationing model done by Agur, which indicates that rationing of credit itself rises from adverse selection.…”

Section: Bank Credit Rationing and Its Implications For Smesmentioning

confidence: 99%

“…[17] In essence, when banks experience trouble financing themselves as an institution, they are forced to ration their credits. [17] Following the analysis of the Stigliz-Weiss a 1981 rationing model done by Agur, which indicates that rationing of credit itself rises from adverse selection. In essence, the borrowers all have an equitable return to their projects, however their projects have different levels of risk due in large to their limited liabilities.…”

Section: Bank Credit Rationing and Its Implications For Smesmentioning

confidence: 99%

http://www.scholarpublishing.org/index.php/ABR/article/view/3581

Obiora¹,

Csordás²

2017

ABR

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Receiving a loan from the bank has in the recent decades become a more difficult procedure with a gradually worsening percentage rate of loan application successes. Small and commercial banks are faced with several external challenges and pressures that affect their lending behaviors and force them to ration credit. Thus, they employ the cookie cutter approach to screening loan applications which tend to leave the borrowers at a greater disadvantage. Even worse, Small and Medium-sized Enterprises who are often in great need of start-up capital are faced with not just the progressively strenuous process of putting in an application at the bank for a loan which by itself goes beyond a day, but also a high chance of its rejection. On the other hand, alternative financing methods in the form of peer to peer lending, crowdfunding, and other online platforms come not just with a different level of ease of applications, but also several marketable benefits for the entrepreneur. This paper works to offer an unbiased and wider view of the current state of alternative financing growth (with a case study from China) while contrasting it with the situation of bank lending and the different levels of ease of loan access the alternative procedures offer. Also, it exposes not just upon the innovation and growing list of advantages of alternative financing, but also the risks involved for the lenders, and how risk is allocated. Finally, the paper presents an insight into the future of the alternative financing market.

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