Does bank competition alleviate credit constraints in developing countries?

Léon, Florian

doi:10.1016/j.jbankfin.2015.04.005

Cited by 176 publications

(150 citation statements)

References 46 publications

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“…Ferri and Murro (2015) find that audited financial statements can minimize information asymmetry and influence easy access to finance. Similarly, a research by Leon (2015) from 69 developing countries finds that firms having audited financial statements are more transparent and it is easier for them to access loans from external lenders. Considering the above studies from the point of view of access to finance, it may be possible to say that having audited financial statements may reduce information asymmetry and that may lessen collateral burden to SMEs.…”

Section: Firm Characteristicsmentioning

confidence: 99%

Collateral Requirements for Sme Loans: Empirical Evidence From the Visegrad Countries

Rahman

Belás

Klieštik

et al. 2017

Journal of Business Economics and Management

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Abstract. The purpose of this paper is to examine the determinants of collateral for small and medium enterprises (SMEs) in the context of Visegrad countries: Czech Republic, Slovak Republic, Hungary and Poland. The data set for this paper was obtained from the Business Environment and Enterprise Performance Survey (BEEPS), which was conducted by the World Bank and the European Bank for Reconstruction and Development (EBRD) from 2012-2014. A binary logistic regression model with different specifications was employed to examine the effect of independent variables on the incidence of collateral. The results show that risky borrowers need to pledge collateral and the reduction of asymmetric information can lower the incidence of collateral for SMEs. Moreover, we find that female borrowers are more likely to pledge collateral than male borrowers are. The results also suggest that loans with a longer maturity are more likely to be collateralized than short-term loans. We find evidence that bank-borrower proximity can alleviate the incidence of collateral whereas bank concentration may increase collateral requirements. Policy makers may consider these results to implement policies that can promote bank competition and can lower collateral requirements for female borrowers. The paper contributes to the ongoing debate on the determinants of collateral.

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Section: Firm Characteristicsmentioning

confidence: 99%

Collateral Requirements for Sme Loans: Empirical Evidence From the Visegrad Countries

Rahman

Belás

Klieštik

et al. 2017

Journal of Business Economics and Management

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“…Since we focus on the market-level competition, following Leon (2015) and Meslier et al (2017), we use the weighted average value of the Lerner index to create a country-level…”

Section: Independent Variable: Lerner Indexmentioning

confidence: 99%

“…In addition, following Leon (2015), rather than using a bank-level Lerner index as in Kabir and Worthington (2017) to measure competition, we use a weighted average Lerner index at the country level. We believe that this measure will be more appropriate in our case since we investigate the impact of country-level market competition, not bank-level market power.…”

Section: Introductionmentioning

confidence: 99%

Competition in Dual Markets: Implications for Banking System Stability

2018

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This paper examines the impact of market competition on the stability of Islamic and conventional banks in countries where these banks operate alongside one another. To investigate this issue, we use a sample of 100 Islamic and 390 conventional banks from 19 countries. Our baseline result shows that competition in a dual market erodes banks' stability.The heightened competitive pressure in a dual market encourages banks to engage in excessive risk-taking that can jeopardize their stability. However, the effect of competition is missing for Islamic banks, suggesting their superiority in having religious clients. Although our overall results support the 'competition-fragility' hypothesis, we find that competition can be beneficial for banks, especially at a low to medium competition level. Last, we also find that the adverse impact of competition can be reduced by having high capitalization, especially in the case of a conventional bank. Some policy implications are discussed in the paper. JEL Classifications: D40; G21; G28; Z12

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“…We take into account selection issue by using finance. In line with previous papers (Popov and Udell, 2012;Léon, 2015), exclusion variables are the perceived degree of competition from the informal sector and the share of goods paid after the delivery. 8 The results are displayed in Table 9.…”

Section: Robustness Testsmentioning

confidence: 65%

“…To identify credit constrained firms, we follow the methodology adopted by Popov and Udell (2012) and Léon (2015) by grouping firms that were turned down and firms that were discouraged from applying.…”

Section: Variablesmentioning

confidence: 99%

Islamic banking development and access to credit

Léon

Weill

2018

Pacific-Basin Finance Journal

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The recent expansion of Islamic banks raises questions on its economic implications. The aim of this paper is to investigate the impact of Islamic banking development on access to credit. We combine data from a unique hand-collected database that covers Islamic banks over the period of 2000 to 2005 with firm-level data covering developing and emerging countries. We find that Islamic banking development has overall no impact on credit constraints, while banking development and conventional banking development alleviate obstacles to financing. However Islamic banking development exerts a positive impact on access to credit when conventional banking development is low. Hence we support the view that Islamic banking does not overall alleviate obstacles to financing, but it can act as substitute to conventional banking.JEL Codes: G21, O16.

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Does bank competition alleviate credit constraints in developing countries?

Cited by 176 publications

References 46 publications

Collateral Requirements for Sme Loans: Empirical Evidence From the Visegrad Countries

Collateral Requirements for Sme Loans: Empirical Evidence From the Visegrad Countries

Competition in Dual Markets: Implications for Banking System Stability

Islamic banking development and access to credit

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