Lending to Small and Medium-Sized Firms: Is There an East-West Gap in Germany?

Lehmann, Erik E.; Neuberger, Doris; Räthke, Solvig

doi:10.1023/b:sbej.0000026024.55982.3d

Cited by 62 publications

(25 citation statements)

References 33 publications

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“…Consistent with our expectations and previous evidence (Lehmann/Neuberger/Räthke 2004), West German enterprises are significantly less likely to be affected by credit constraints than enterprises located in East Germany. Differences in this regional risk seem to be more important than risk differentials arising from other characteristics of the firm and its owner.…”

Section: Multivariate Resultssupporting

confidence: 81%

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Financial constraints of ethnic entrepreneurship: evidence from Germany

Bruder

Neuberger

Räthke-Döppner

2011

International Journal of Entrepreneurial Behavior &Amp; Research

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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. Abstract This is the first attempt to test hypotheses about financial constraints of ethnic minority owned businesses in Germany. Using data from a survey among 3,000 ethnic and native entrepreneurs, we examine differences in the financing patterns between both demographic groups. We find that entrepreneurs with a migration background are more likely to be denied credit or to obtain smaller loan amounts than requested. After controlling for observed risk factors and financial relationships as explanatory variables, ethnicity plays no role in explaining differences in the probability of credit rationing. These can be rather explained by the firm's location and characteristics of the bank-customer relationship. Thus, we find no evidence for prejudicial discrimination in the loan market. Terms of use: Documents inJEL Code: G21, G32

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Section: Multivariate Resultssupporting

confidence: 81%

“…Moreover, we include the variable 'West', which indicates whether the firm is located in West Germany. Lending to East German firms tends to be riskier than lending to West German firms due to a gap in economic development between both regions (Lehmann/Neuberger/Räthke 2004).…”

Section: Multivariate Resultsmentioning

confidence: 99%

Financial constraints of ethnic entrepreneurship: evidence from Germany

Bruder

Neuberger

Räthke-Döppner

2011

International Journal of Entrepreneurial Behavior &Amp; Research

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“…Comparable studies on bank lending to SMEs show that firms located in East Germany represent a higher credit risk than those located in the richer regions of West Germany (Lehmann et al, 2004). Moreover, we expect that demographic change involves higher economic risks in East Germany than in West Germany.…”

Section: Independent Variablesmentioning

confidence: 95%

Leasing by small enterprises

Neuberger

Räthke-Döppner

2013

Applied Financial Economics

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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 AbstractUsing internal data of a leasing company in Germany, we examine the determinants of the probability and use of leasing by small firms. We find that small and young firms are likely to be constrained on the leasing market but use leasing to increase their debt capacity. Beyond contract-and firm-specific characteristics, demographic and socio-economic characteristics of the entrepreneur matter. Older and higher qualified entrepreneurs have easier access to leasing than those who are younger or non-educated, but the latter lease more than highly educated entrepreneurs. Female and non-married entrepreneurs of young firms use leasing to increase their debt capacity. These results are important for aging populations where the financing of entrepreneurial activities by highly qualified, older and female persons are important to sustain growth.JEL classification: D23, D92, G21, G31, G32, J14, J16

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“…Further, Hernandez-Canovas and Martınez-Solano (2010) find the level of regional concentration in the banking sector to be relevant in Spain. Other factors found to exert a significant effect in the context of relationship lending and SMEs in diverse European countries include trust (Howorth and Moro, 2012), the number of banks that are financing a firm (Ongena and Smith, 2000), the physical closeness of the bank to the borrower (Alessandrini et al, 2009;Neuberger et al, 2008), quality of management and market positioning (Grunert et al, 2005), and the socio-economic context (Lehmann et al, 2004).…”

Section: Publicly Available 'Hard' Informationmentioning

confidence: 99%

How do banks assess entrepreneurial competence? The role of voluntary information disclosure

Moro

Fink

Kautonen

2012

International Small Business Journal

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This article explores relationship lending in the small business context: it discusses the roles of entrepreneurial competence and voluntarily disclosed information as determinants of credit access. More specifically, it proposes that the loan manager’s evaluation of the information voluntarily disclosed by the entrepreneur is an important complement to publicly available financial data and soft information collected through observation and third parties in framing the loan manager’s perception of entrepreneur competence. Further, the article argues that banks charge lower interest rates if the loan manager perceives the entrepreneur to be competent. Econometric analysis based on 433 bank–firm relationships supports these hypothesised relationships. The results imply that entrepreneurs need to communicate their competence effectively to loan managers, and that banks should utilise these personal evaluations as inputs to lending decisions.

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Lending to Small and Medium-Sized Firms: Is There an East-West Gap in Germany?

Cited by 62 publications

References 33 publications

Financial constraints of ethnic entrepreneurship: evidence from Germany

Financial constraints of ethnic entrepreneurship: evidence from Germany

Leasing by small enterprises

How do banks assess entrepreneurial competence? The role of voluntary information disclosure

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