Bank competition, concentration and EU SME cost of debt

Wang, Xiaodong; Han, Liang; Huang, Xing

doi:10.1016/j.irfa.2020.101534

Cited by 48 publications

(37 citation statements)

References 109 publications

(177 reference statements)

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“…This confirms Elsas's 120 insight that under certain conditions, relationship lending does not require a long duration or exclusivity in the bank-borrower relationship, and the finding of Bonini et al 121 that relationship lending does not imply rent extraction. In addition, we take a step towards the conclusion of Wang et al 122 that a more concentrated banking market worsens SME credit conditions, with it apparently holding only for less creditworthy firms.…”

Section: Empirical Estimationmentioning

confidence: 84%

Spatial dependence in small cooperative bank risk behavior and its effects on bank competitiveness and SMEs

Algeri

Forgione

Mucciardi

2021

Appl Stoch Models Bus & Ind

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In this article we consider the effects of the inclusion of spatial dependence in the empirical model measuring small cooperative banks' risk performance.In the presence of cross-sectional dependence, spatial analysis deals with co-movement among geographical units, allowing for the evaluation of spillover effects and improving econometric models. The article makes several contributions to the literature. First, we support the hypothesis that the inclusion of spatial terms improves small bank soundness models. Second, with the Z Score used as a proxy for bank soundness, we indirectly test the impacts of relationship lending on small firms, which is a classic tool adopted by small banks to assess the creditworthiness of small firms. Third, since we control for banks' market power, we expand the literature on the relationship between bank risk and market competitive pressure. Finally, we find empirical evidence that bank size does affect the financial standing of small banks.

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Section: Empirical Estimationmentioning

confidence: 84%

Spatial dependence in small cooperative bank risk behavior and its effects on bank competitiveness and SMEs

Algeri

Forgione

Mucciardi

2021

Appl Stoch Models Bus & Ind

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“…Therefore, SMEs are more vulnerable to financing constraints during a shortage of bank credit supply, 6 However, our data cannot indicate if the demand variation is predictable or not by managers. 7 Please see Wang et al (2020) for a discussion on the intrinsic bank financing constraints of SMEs. such as in economic downturns.…”

Section: H2bmentioning

confidence: 99%

“…In this respect, and since EU SMEs do not have a strong access to other financial instruments other than bank credit and trade credit (Palacin-Sanchez et al 2018), empirical studies have attempted to tackle on SME credit constraints. For example, from the banking market perspective, in terms of bank size (Jackson and Tomas 1995), bank market power (Love and Peria 2015;Wang et al 2020), although results are mixed and debates still continue.…”

Section: : Introductionmentioning

confidence: 99%

“… See Han et al (2017) andWang et al (2020) for a review on 'Market Power Hypothesis The relation between trade credit investment (debtors) and bank credit could also be in reverse direction asFerrando and Mulier (2013) suggest that banks may relieve lending standards if the accounts receivable can be used as collateral. We therefore reverse the bank credit ratio and trade credit ratio of Models 9-11 in Table5(not reported) and the negative association remains.…”

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confidence: 99%

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The financial and operational impacts of European SMEs’ use of trade credit as a substitute for bank credit

Wang

Han

Huang

et al. 2021

The European Journal of Finance

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We study the impacts of the use of trade credit on SME financial performance and operational distress in a sample of 74,036 SMEs across 19 EU countries between 2006 to 2015. Under the premise that trade credit acts as a substitute for bank credit, our results show that supplying trade credit improves profitability, but we show little evidence that such an investment is more profitable for bank credit richer SMEs, although such firms did redistribute more bank fund through trade credit to their customers. For receivers, we show that the use of trade credit finance alleviates operational distress, especially for those SMEs facing liquidity constraints, such as those which have less access to bank credit or under credit tightened periods. This distress reduction effect is also reflected in their profitability indicators. However, the longer the average collection period and credit period, the less effective the trade credit effects respectively on improving SME profitability and reducing operational distress.

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“…In this paper, we aim to contribute to this growing area of research by examining the association between the financial statement format (abbreviated or micro accounts) and the level of trade credit. This research is important given that small companies struggle more than large companies to obtain finance (see, e.g., [8]).…”

Section: Introductionmentioning

confidence: 99%

Abbreviated or Micro-Entity Accounts? Effect of Financial Reporting Format on the Availability of Trade Credit

Saerens¹,

Ceustermans²

2021

Sustainability

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The purpose of this study was to investigate the association between the financial statement format (abbreviated or micro) and the level of trade credit. To test this relationship, we used a sample of 76,490 company-year observations of small companies in Belgium over the period of 2017–2019. We found that micro-entity accounts are negatively associated with the level of trade credit. Hence, our results provide evidence that more detailed financial statements are associated with higher levels of trade credit. In addition, we show that suppliers increase their reliance on the financial statement format when companies have lower inventory levels. Our results provide additional insights into the value of financial statements of small companies in the context of trade credit decisions. This study is set within the wider context of the simplification measures taken by the European Union (EU) to reduce the administrative burdens for small companies. The recent policy measures have further extended the debate on financial reporting regulation for small companies. A primary topic in this context is the discussion of the value of publicly available financial information in a small company context.

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Bank competition, concentration and EU SME cost of debt

Cited by 48 publications

References 109 publications

Spatial dependence in small cooperative bank risk behavior and its effects on bank competitiveness and SMEs

Spatial dependence in small cooperative bank risk behavior and its effects on bank competitiveness and SMEs

The financial and operational impacts of European SMEs’ use of trade credit as a substitute for bank credit

Abbreviated or Micro-Entity Accounts? Effect of Financial Reporting Format on the Availability of Trade Credit

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