Availability and cost of credit for small businesses: Customer relationships and credit cooperatives

Angelini, Paolo; Salvo, Roberto Di; Ferri, Giovanni

doi:10.1016/s0378-4266(98)00008-9

“…Considering size, small banks charge higher interest rates on lending but show a lower time variation. This fits with the standard idea of a close customer relationships between small firms and small banks that provides them with an incentive to smooth the effect of a monetary tightening (Angelini, Di Salvo and Ferri, 1998).…”

Section: Characteristics Of the Datasetsupporting

confidence: 78%

“…It is interesting to note that, in contrast with the evidence for the US , the interaction terms between size and monetary policy are insignificant. The fact that the interest rate on short term lending of smaller banks is not more sensitive to monetary policy than that of larger banks is well documented in the literature for Italy and reflects the close customer relationship between small banks and small firms (Angeloni et al 1995;Conigliani et al, 1997;Angelini, Di Salvo and Ferri, 1998;Ferri and Pittaluga, 1996). This result is also consistent with Ehrmann et al (2003) where size does not emerge as a useful indicator for the distributional effect of monetary policy on lending not only in Italy but also in France, Germany and Spain.…”

Section: Bank Lending Channelmentioning

confidence: 91%

How do banks set interest rates?

Gambacorta

¹

2008

European Economic Review

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The aim of this paper is to study cross-sectional differences in banks interest rates. It adds to the existing literature in two ways. First, it analyzes in a systematic way both micro and macroeconomic factors that influence the price setting behavior of banks. Second, by using banks' prices (rather than quantities) it provides an alternative way to disentangle loan supply from loan demand shift in the "bank lending channel" literature. The results, derived from a sample of Italian banks, suggest that heterogeneity in the banking rates pass-through exists only in the short run. Consistently with the literature for Italy, interest rates on short-term lending of liquid and well-capitalized banks react less to a monetary policy shock. Also banks with a high proportion of long-term lending tend to change their prices less. Heterogeneity in the pass-through on the interest rate on current accounts depends mainly on banks' liability structure. Bank's size is never relevant.

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“…These hold-up costs may be reduced through multiple banking relationships. However, borrowing from too many banks cannot be optimal because this would imply a higher probability of being credit rationed (Angelini/Di Salvo/Ferri 1998). Hence, information opaque firms should hold only one to few bank relationships.…”

Section: Theory and Hypothesesmentioning

confidence: 99%

Financial constraints of ethnic entrepreneurship: evidence from Germany

Bruder

¹

,

Neuberger

²

,

Räthke-Döppner

³

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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“…The survey targets manufacturing firms with more than 10 employees: the universe of firms with more than 500 employees and a stratified sample of firms with 11-500 employees 9 . The sample is fairly representative of the Italian economic structure: 66 percent of firms have less than 50 employees, while 91 percent are below the threshold of 250 6 Consistent with the hypothesis that relational banks capture small firms, many studies concerning countries other than the USA have found that interest rates and collateral on small business loans increase with the length of the lending relationship and that the usage rates of credit lines decrease for older customers (Angelini et al 1998;Degryse and Van Cayseele 2000;Hernandez and Martinez 2006;Ono and Uesugi 2005;Barone, Felici and Pagnini 2006;Ogawa et al 2007;Grunert and Norden 2009;Jiménez et al 2009;Ioannidou and Ongena 2010). In addition, the profitability of small firms tends to be lower when they maintain exclusive relationships with few banks (Montoriol Garriga 2006).…”

Section: Datamentioning

confidence: 89%

“…4 Evidence that longer relationships with a lender increase credit availability for small firms is provided by Angelini et al (1998) and Harhoff and Körting (1998) for European countries, and by Petersen and Rajan (1994), Berger and Udell (1995), Cole (1998), Chakraborty and Hu (2006) and Bharat et al (2007Bharat et al ( , 2009 for the United States.…”

Section: Why Should Main Banks Influence the Growth Of Borrowing Firms?mentioning

confidence: 99%

Long-lasting bank relationships and growth of firms

Gambini

¹

,

Zazzaro

²

2011

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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. Long-Lasting Bank Relationships and Growth of Firms Abstract A puzzling but consistent result in the empirical literature on banking is that firms with close bank ties do not grow faster than bank-independent firms. In this paper, we reconsider the link between relationship lending and firms' growth, distinguishing firms by size and "health". The idea is that the beneficial effects of relationship lending on information asymmetries can be compensated by other negative capture, risk and externality effects which make relational banks reluctant to support long-term growth projects of client firms, and that the strength of these compensating effects varies with firm size and health status. We explore the influence of long-lasting bank relationships on employment and asset growth of a large sample of Italian firms. The main finding is that relationship lending hampers the efforts of small firms to increase their size, while it mitigates the negative growth of troubled, medium-large enterprises. Terms of use: Documents inJEL-Code: G21, G34.Keywords: relationship lending, capture effects, firms' growth. We wish to thank Piero Alessandrini, Carlo Altavilla, Marco Lilla, Jack Lucchetti, Lars Norden, Andrea Presbitero, Franco Spinelli, Carmine Trecroci and Timo Wollmershäuser for comments and suggestions. Our thanks also go to seminar participants at the University of Brescia, University of Naples 'Parthenope', University of Milan and at the MoFiR conference on The changing geography of money, banking and finance in a post-crisis world (Ancona, Italy) and the Cesifo-Delphi conference on Financial markets, corporate governance and macroeconomic outcomes (Munich, Germany). Usual disclaimer applies. Alessandro Gambini 2

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Availability and cost of credit for small businesses: Customer relationships and credit cooperatives

Cited by 412 publications

References 33 publications

How do banks set interest rates?

How do banks set interest rates?

Financial constraints of ethnic entrepreneurship: evidence from Germany

Long-lasting bank relationships and growth of firms

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