The impact of the financial system’s structure on firms’ financial constraints

Baum, Christopher F.; Schäfer, Dorothea; Talavera, Oleksandr

doi:10.1016/j.jimonfin.2011.02.004

Cited by 70 publications

(28 citation statements)

References 34 publications

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“…Emerging markets mainly use bank-based financial systems, and are not market-based, which requires more time to recover from economic downturns after a financial crisis (Baum et al 2011;Allen et al 2012). Since the late 1980s, there have been structural changes, as well as the openness of domestic financial markets in emerging economies.…”

Section: Government Policymentioning

confidence: 99%

“…In recent years, the barriers on foreign bank entry and activity have been largely cut in many countries, and the loan proportion from foreign banks has also gradually increased (Haselmann, Wachtel 2011), implying more extensive financial services. Baum et al (2011) stated that financial architecture plays a key role in SMEs by influencing the levels of financial development and economic growth. Ndikumana (2005) reported that when a country has a well-developed financial system, investing is easier with lower finance costs, which effectively elevates the level of domestic investment and long-term economic growth.…”

Section: Financial Servicementioning

confidence: 99%

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Improving China’s Regional Financial Center Modernization Development Using a New Hybrid Madm Model

Jian-guo

Tzeng

2017

Technological and Economic Development of Economy

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Abstract. The regional financial center is the propeller of regional economic development. Regional financial center modernization, however, has been the predominant propulsion of economic sustainability. Decisions related to regional financial center modernization development are inherent problems of multiple attribute decision-making (MADM), and strategically important to the government. The purpose of this paper is to set up a regional financial center improvement model for modernization development, as based on a hybrid MADM model, which addresses the main causal-effect factors and amended priorities in order to strengthen ongoing planning. This paper adopts a new hybrid MADM model combined with the DEMATEL technique to construct an influential network relationship map (INRM) and determined the influential weights of DANP. Then, a modified VIKOR method using influential weights is applied to measure and integrate the performance gaps from each criterion into dimensions, as well as the overall criterion for evaluating and improving the modernization development of the regional financial center, as based on INRM. Finally an empirical case study using data from the Guangzhou regional financial center is carried out as an example to demonstrate the suitability of the proposed hybrid MADM model for solving real-world problems. The results show the priorities for improvement, as based on the degree of the effect and impact of the dimensions, as follows: first is making "government policy", second is enforcing "financial infrastructure and safety", next is formulating "financial institutions and human resources", and finally "financial service".

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Section: Government Policymentioning

confidence: 99%

Section: Financial Servicementioning

confidence: 99%

Improving China’s Regional Financial Center Modernization Development Using a New Hybrid Madm Model

Jian-guo

Tzeng

2017

Technological and Economic Development of Economy

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“…As previously mentioned, financial development and macroeconomic volatility are linked through the existence of financial frictions which amplify shocks by financially constraining firms. Baum et al (2011) examine how obstacles to external financing may vary across financial systems. They find that both the financial development and the financial structure of a country are important determinants of the financial constraints that firms face.…”

Section: Financial Structure and Macroeconomic Volatilitymentioning

confidence: 99%

Financial Structure and Macroeconomic Volatility: A Panel Data Analysis

Bezooijen

Bikker

2017

SSRN Journal

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In 2015, the European Commission (EC) launched its action plan for the creation of a European Capital Markets Union. The EC aims to return the European economy to sustainable growth and to enhance its shock absorbing capacity by reducing the reliance on bank finance and stimulating financial deepening and cross-border integration of Europe's capital markets. Financial diversification and integrated European capital markets are expected to improve risk sharing among households, supporting economic stability. However, the economic literature reveals a lack of theoretical and empirical consensus on the superiority of either a bank-based or a market-based financial system in promoting growth or reducing macroeconomic volatility. This paper is the first to include bond markets in its financial structure indicators, besides stock markets and bank lending. Using panel data on 55 countries between 1975 and 2014 and three different measures of financial structure, we investigate the effect of the structure of the financial system on the volatility of output and investment growth as well as their cyclical components. We do not find evidence that market-based financial structures dampen volatility of output or overall investment. Increase of the stock market size relative to that of the banking sector has a significant positive effect on the business cycle volatility of investments.

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“…Following Almeida et al (2004), several papers alternatively measure firms' financing obstacles by the cash flow sensitivity of cash − a measure more focused on the financial situation of the firm than the cash-flow sensitivity of investment. Based on the cash-flow sensitivity of cash, Baum et al (2011) find that the financial architecture is important for reducing the financing constraints of small firms: bank-based systems tend to provide better access to finance for SMEs than market-based systems in normal times. However, the authors point out that the results may differ in crisis times.…”

Section: Related Literaturementioning

confidence: 99%

Don't Stop Me Now: The Impact of Credit Market Fragmentation on Firms' Financing Constraints

Bremus

Neugebauer

2017

SSRN Journal

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This paper investigates how the withdrawal of banks from their cross-border business impacted the borrowing costs of European firms since the crisis. We combine aggregate information on total and cross-border credit with firm-level survey data for the period 2010 -2014. We find that the decline in cross-border lending led to a deterioration in the borrowing conditions of small firms. In countries with more pronounced reductions in cross-border credit inflows, the likelihood of a rise in firms' external financing costs has increased. This result is mainly driven by the interbank channel, which plays a crucial role in transmitting shocks to the real sector across borders.Keywords: International banking, firm finance, credit constraints. All rights reserved. No part of this publication may be reproduced, stored in a retrieval system or transmitted in any form or by any means without the prior permission in writing of the publisher nor be issued to the public or circulated in any form other than that in which it is published.Requests for permission to reproduce any article or part of the Working Paper should be sent to the editor at the above address. Abstract This paper investigates how the withdrawal of banks from their cross-border business impacted the borrowing costs of European firms since the crisis. We combine aggregate information on total and cross-border credit with firm-level survey data for the period 2010 -2014. We find that the decline in cross-border lending led to a deterioration in the borrowing conditions of small firms. In countries with more pronounced reductions in cross-border credit inflows, the likelihood of a rise in firms' external financing costs has increased. This result is mainly driven by the interbank channel, which plays a crucial role in transmitting shocks to the real sector across borders.JEL-Classifications: F34, F36, G15, G21.

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The impact of the financial system’s structure on firms’ financial constraints

Cited by 70 publications

References 34 publications

Improving China’s Regional Financial Center Modernization Development Using a New Hybrid Madm Model

Improving China’s Regional Financial Center Modernization Development Using a New Hybrid Madm Model

Financial Structure and Macroeconomic Volatility: A Panel Data Analysis

Don't Stop Me Now: The Impact of Credit Market Fragmentation on Firms' Financing Constraints

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