Lending to small businesses: the role of loan maturity in addressing information problems

Ortiz-Molina, Hernán; Penas, Marı́a Fabiana

doi:10.1007/s11187-007-9053-2

Cited by 204 publications

(131 citation statements)

References 56 publications

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“…The result is the same as that found by Ortiz- Molina and Penas (2008), because the fixed assets are not appropriate for short-term loan guarantee (cited in Dasilas and Papasyriopoulos 2015). Amidu (2007) also finds this negative relationship between short-term debt and tangible assets, in Ghana.…”

Section: Capital Structure Determinants Of Large-listed Firmssupporting

confidence: 77%

An Inverse Problem Study: Credit Risk Ratings as a Determinant of Corporate Governance and Capital Structure in Emerging Markets: Evidence from Chinese Listed Companies

Kang

Ausloos

2017

Economies

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Abstract:Credit risk rating is shown to be a relevant determinant in order to estimate good corporate governance and to self-optimize capital structure. The conclusion is argued from a study on a selected (and justified) sample of (182) companies listed on the Shanghai Stock Exchange (SHSE) and the Shenzhen Stock Exchange (SZSE) and which use the same Shanghai Brilliance Credit Rating & Investors Service Company (SBCR) assessment criteria, for their credit ratings, from 2010 to 2015. Practically, 3 debt ratios are examined in terms of 11 characteristic variables. Moreover, any relationship between credit rating and corporate governance can be thought to be an interesting finding. The relationship we find between credit rating and leverage is not as evident as that found by other researchers for different countries; it is significantly positively related to the outside director, firm size, tangible assets and firm age, and CEO and chairman office plurality. However, leverage is found to be negatively correlated with board size, profitability, growth opportunity, and non-debt tax shield. Credit rating is positively associated with leverage, but in a less significant way. CEO-Board chairship duality is insignificantly related to leverage. The non-debt tax shield is significantly correlated with leverage. The correlation coefficient between CEO duality and auditor is positive but weakly significant, but seems not consistent with expectations. Finally, profitability cause could be regarded as an interesting finding. Indeed, there is an inverse correlation between profitability and total debt (Notice that the result supports the pecking order theory). In conclusion, it appears that credit rating has less effect on the so listed large Chinese companies than in other countries. Nevertheless, the perspective of assessing credit risk rating by relevant agencies is indubitably a recommended time dependent leverage determinant.

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Section: Capital Structure Determinants Of Large-listed Firmssupporting

confidence: 77%

An Inverse Problem Study: Credit Risk Ratings as a Determinant of Corporate Governance and Capital Structure in Emerging Markets: Evidence from Chinese Listed Companies

Kang

Ausloos

2017

Economies

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“…With respect to the first group of firm-specific factors, we examine four inverse proxies for information asymmetry: Size (number of full-time employees), Age (number of years the firm has been operating), Audit (1 if external auditors check the firm financial statement, and 0 otherwise) (Berger, Udell 2002;Chakraborty, Hu 2006;Ortiz-Molina, Penas 2008;Menkhoff et al 2012;Duarte et al 2017). By following the related studies, we also consider firm size, age, audit report as inverse proxies for information opacity, and expect to find a negative association with collateral.…”

Section: Independent Variablesmentioning

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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“…Major owners, such as families in the context of SMEs, have two important effects on the nature of the banking relationship. On the one hand, as mentioned by Jensen and Meckling (1976), Fama and Jensen (1983b), Ortiz-Molina and Penas (2007) and Andres (2008), among others, in assuming a supervisory role, major owners significantly reduce information asymmetries and agency costs, facilitating an increase in the number of banking relationships. On the other hand, when these owners supply personal collateral, this facilitates new banking relationships (Ono andUesugi, 2009, Steijvers andVoordeckers, 2009).…”

Section: Methodsmentioning

confidence: 99%

Banking Relationships, Managerial Ownership and Operational Performance: A Simultaneous Equations Approach in the Context of SMEs

Augusto¹,

Pinto²

2014

International Journal of Financial Research

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This paper provides new evidence for the relationship between the nature of banking relationships, managerial ownership and operational performance in supporting reciprocal effects between these variables in the context of small and medium enterprises (SMEs). A simultaneous equations model was applied to a sample of 4,163 Portuguese SMEs and to cross-section data. Evidence was found that these attributes provide simultaneous relations among themselves. In particular, on the one hand, our results support a negative effect of the number of banks with which the company works and managerial ownership on operational performance. On the other hand, the number of banks with which the company maintains a relationship is positively conditioned by operational performance and negatively by managerial ownership. In turn, managerial ownership is negatively conditioned by operational performance and the nature of the banking relationship.

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Lending to small businesses: the role of loan maturity in addressing information problems

Abstract: Loan maturity, Collateral, Small businesses, Relationship lending, G21, G32, L26,

Cited by 204 publications

References 56 publications

An Inverse Problem Study: Credit Risk Ratings as a Determinant of Corporate Governance and Capital Structure in Emerging Markets: Evidence from Chinese Listed Companies

An Inverse Problem Study: Credit Risk Ratings as a Determinant of Corporate Governance and Capital Structure in Emerging Markets: Evidence from Chinese Listed Companies

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

Banking Relationships, Managerial Ownership and Operational Performance: A Simultaneous Equations Approach in the Context of SMEs

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