The Maturity Structure of Bank Credit: Determinants and Effects on Economic Growth

Valev, Neven T.; Tasic, Nikola

doi:10.2139/ssrn.1121840

Cited by 6 publications

(7 citation statements)

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“…Existing literature documents that firms with higher long-term debt ratios grow faster than their counterparts (Demirgüç-Kunt and Maksimovic, 1998), have lower growth volatility (Demirgüç-Kunt et al, 2017) and suffer less from credit contraction following a financial crisis (Duchin et al, 2010;Vermoesen et al, 2013). This micro-evidence is in line with macro-evidence underlining the positive effect of long-term credit on growth (Gbenyo and Kpodar, 2010;Valev and Tasic, 2008). To our knowledge, we are the first to study the effect of short-term and long-term bank credit provision on firm entry.…”

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confidence: 64%

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Long-term finance and entrepreneurship

Léon

2019

Economic Systems

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This paper investigates whether long-term finance affects the firm entry across the world. We construct a new database on short-term and long-term credit provided by commercial banks to the private sector in 85 countries over the period 1995-2014. We then analyze whether differences in entrepreneurship are correlated with the provision of short-term and long-term bank credit. Data on entrepreneurship are extracted from two frequently used databases: the Global Entrepreneurship Monitoring dataset and Entrepreneurship Database, each of which captures different aspects of firm creation. Econometric results indicate that long-term credit does not stimulate the firm entry. On the contrary, we find that short-term credit exerts a positive impact at each stage of firm creation from activity birth to registration. Our findings are robust to a battery of sensitivity tests, including additional control variables, alternative dependent variables, alternative sample, and changes in econometric specification. Our findings suggest that better provision of short-term credit allows entrepreneurs to apply for a formal loan instead of relying exclusively on informal loans or internal funds, contrary to long-term loans.

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supporting

confidence: 64%

“…This procedure is similar to papers collecting the same type of data(Gbenyo and Kpodar, 2010;Valev and Tasic, 2008).…”

mentioning

confidence: 99%

Long-term finance and entrepreneurship

Léon

2019

Economic Systems

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“…The bank credit maturity varies across countries, even if the countries have a similar level of economic and financial development, begin with Bencivenga and Smith (1991) developed a model of the relationship between the maturity of banks' credit and economic growth. Valev, and Tasic, (2008) show that bank credit maturity is shorter in countries with less rule of law, higher inflation, less developed financial markets, and greater economic instability. Some empirical evidence has supported the hypothesis that longer credit maturity enhances economic growth.…”

Section: Literature Reviewmentioning

confidence: 99%

“…The commercial banks occupy a prominent position in stimulating economic activity through the role of financial intermediary between savers and borrowers. The impact of financing on growth depends on the country's economic and institutional environment (Valev & Tasic, 2008). On the other hand, any shortage of financing results in negative effects on the production process and the exploitation of available resources, and this hinders economic activities.…”

Section: Introductionmentioning

confidence: 99%

Bank Credit Maturity Structure and Economic Growth in Saudi Arabia

Alzyadat¹

2022

R. Econ. and Finan.

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The commercial banks occupy a prominent position in stimulating economic activity through the role of financial intermediary between savers and borrowers, and contributing in the money supply. The study attempts to answer the question: Is there a relationship between Bank credit maturity structure and economic growth in Saudi Arabia?. to answer this question the study uses annual data during the period 1995 -2020, using the vector autoregression VAR, Granger causality tests, the Impulse Response Function, and the Variance Decomposition. The results of both the Impulse Response Function, and the Variance Decomposition indicate that the increases in RGDP are associated with higher bank credit, especially the long-term credit, which confirms the effectiveness of the credit channel in Saudi Arabia. Further, Granger causality tests suggest a bi-directional causal relationship between RGDP growth and long-term bank credit in KSA.The analytical results supported the hypothesis that the expansion of bank credit enhances economic growth. Where the study concluded that the expansion of bank credit, especially long-term credit in the KSA acts as a credit channel to stimulate economic growth. Therefore, economic growth is faster as commercial banks provide more long-term credit. The study recommends the need for more long-term bank credit as it is an important channel through which economic growth is nourished.

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“…Our paper is also related to the few papers that explore the determinants of long-term credit using aggregated bank balance sheet data. Using cross-country data on bank loan maturity, Valev and Tasić (2008) find that the share of long-term credit is higher in countries with strong institutions, low inflation, large financial markets, and credit information systems. However, they did not find any effect of bank concentration on debt maturity.…”

Section: Introductionmentioning

confidence: 99%

Bank Credit Allocation in Latin America and the Caribbean

Gutiérrez¹,

Karmali²,

Sourrouille³

2018

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The Policy Research Working Paper Series disseminates the findings of work in progress to encourage the exchange of ideas about development issues. An objective of the series is to get the findings out quickly, even if the presentations are less than fully polished. The papers carry the names of the authors and should be cited accordingly. The findings, interpretations, and conclusions expressed in this paper are entirely those of the authors. They do not necessarily represent the views of the International Bank for Reconstruction and Development/World Bank and its affiliated organizations, or those of the Executive Directors of the World Bank or the governments they represent.

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The Maturity Structure of Bank Credit: Determinants and Effects on Economic Growth

Cited by 6 publications

References 61 publications

Long-term finance and entrepreneurship

Long-term finance and entrepreneurship

Bank Credit Maturity Structure and Economic Growth in Saudi Arabia

Bank Credit Allocation in Latin America and the Caribbean

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