Determinants of loan maturity in small business lending

Abstract

This paper investigates the determinants of loan maturity of small and medium enterprises (SMEs) in the context of Visegrad countries: Czech Republic, Slovak Republic, Poland, and Hungary. The data of instead of for this paper was obtained from the Business Environment and Enterprise Performance Survey (BEEPS), which is a joint project of the European Bank for Reconstruction and Development and the World Bank. By using a binary logistic model, we have found that loan maturity is shorter for older and mature firms, firms owned by female and firms experiencing a shortage of liquidity. At the same time, we have also found that firms having concentrated ownership structure and more tangible assets can borrow for a longer period. In addition to that, we have found evidence that loan maturity is longer for the firms located closer to a bank branch. We also provide empirical support for the assumption that bank low competition is associated with longer maturity. From the obtained results, we may recommend SMEs to borrow from banks that are within their vicinity since this may increase the maturity of loans. Policy makers are recommended to implement policies so

The Effect of Bank Competition on the Cost of Credit: Empirical Evidence from the Visegrad Countries

“…While several studies examined the effect of bank market power in relation to access to finance [29] [41] [1] [31], in this paper, we intend to follow a different path by examining the effect of bank market power on the cost of credit for SMEs. By using the World Business Environment Survey (WBES) [4], shows that the high cost of credit is the first and foremost problems for SMEs that restrict the firms to access bank loans.…”