Auditing and credit granting to SMEs: an integrative perceptual model

Abstract

Purpose The purpose of this study is to develop an integrative model of credit granting to small- and medium-size enterprises (SMEs) incorporating the loan officers’ perceptual factors about SMEs (risk and trust) and accounting information (quality and usefulness). Moreover, the role of auditing on credit granting has been studied. Design/methodology/approach The structural equation modelling (SEM) approach is used to test the joint effect of explanatory variables. Empirical evidence is obtained from a questionnaire administered to 471 bank loan officers in Spain. The questions are asked for both audited and not-audited firms. Findings The results obtained confirm that perceived risk and trust have a significant influence on the probability that SMEs can get access to credit and obtain better financing conditions. Additionally, this research supports the relevance of presenting high-quality accounting information, as it increases information usefulness for loan officers, which improves the perceived risk and trust on SMEs and leads to better credit granting. There are no significant differences on the model between the sub-groups of audited and not-audited SMEs, although the valuations are significantly better for the former. Research limitations/implications This study shows the need to consider subjective variables to understand properly the cognitive process underlying credit-granting decisions. Practical implications This research has relevant implications for the management of relationships between SMEs and banks. Originality/value This study contributes to the previous literature by proposing an integrative model of the variables that affect loan officers’ lending decision to SMEs, considering the influence of perceptual variables such as risk and trust, as well as the evaluation of the information available.

They The Role of Gender, Age, And Educational Groups in Utilitarian Motivation for Sharia Products

“…Empirical evidence suggests that the usefulness of information is a factor of perceived trustworthiness. It was further explained that people would generally trust companies that convey useful information (Palazuelos et al 2020). Easy access to information can demonstrate the importance of reliable information to build and maintain consumer trust (Najib et al 2022).…”

Comments of the AFAANZ auditing and assurance standards committee on proposed international standard on auditing ISA for LCE

“…Research also suggests that less complex entities will select the nature of assurance (if any assurance) that best suits their circumstances (e.g., Gong et al, 2022;Palazuelos et al, 2020).…”

“…Research also suggests that less complex entities will select the nature of assurance (if any assurance) that best suits their circumstances (e.g., Gong et al, 2022; Palazuelos et al, 2020). To the extent that entities may feel that the use of a standard for less complex entities miscommunicates the nature of the entity (e.g., somehow less sophisticated), entities will choose an audit undertaken with reference to the full suite of standards.…”

“…There is evidence that entities will voluntarily choose the appropriate level of assurance that suits the requirements of their financial report users A large body of research highlights that entities voluntarily opt for high-quality accounting and auditing information to facilitate better access to and conditions in capital markets (e.g., Allee & Yohn, 2009;Briozzo & Albanese, 2020;Gong et al, 2022;Palazuelos et al, 2020;van Caneghem & van Campenhout, 2012;Vander Bauwhede et al, 2015). Less complex entities are, themselves, in the best position to decide whether a reasonable level of assurance is required and, if so, whether this should be achieved via an audit based on the full suite of standards or a self-contained standard for less complex entities.…”

Does Asymmetric Information Perception Relate to MSMEs’ Access to Banking Credit?

“…According to [17], many MSMEs around the world have significant financial needs but do not apply for credit. Several studies have found that firm characteristics, rather than industry factors, determine capital structure [18]. According to [19,20], small firms perceive debt as an expensive resource due to the costs of information asymmetry and credit services.…”