Explaining loan rate differentials between small and large companies: evidence from Switzerland

Abstract

The lending-rate differentials between loans to small and large companies are striking. According to several studies, these disparities of loan rates are primarily a result of a lower informational efficiency at small companies. This study examines to what extent such differences in loan rates are caused not only by informational inefficiencies, but also by operational costs and the borrower's negotiation power. By using unique, hand-collected data from the credit-pricing models of 15 Swiss regional banks, we provide new empirical evidence that operational costs are a key factor in explaining differences in lending rates between small and large enterprises. Furthermore, we also found that the lack of negotiation power of small enterprises-expressed in the profit margin amount of the bank-has significant explanatory power.

Access to Finance by Small and Medium Enterprises: a Cross‐Country Analysis with A New Data Set

“…Furthermore, in many economies, the majority of jobs are provided by SMEs. In OECD countries, for example, SMEs with less than 250 employees employ two-thirds of the formal work force (Beck et al, 2008b;Dietrich, 2010). Using country-level data, Ayyagari et al estimate that, on average, SMEs account for close to 60% of employment in the manufacturing sector.…”

SMEs Growth in the Czech Republic: Some Macroeconomic Perspectives

“…III, in all the years, the interest rate for SMEs was higher than larger fi rms. Dietrich (2010) states unequivocally that the lack of negotiating power of SMEs especially micro and small enterprises, has signifi cant power in explaining diff erences in lending rates to large companies and small businesses. Similarly, Lacina and Vavřina (2013) argue that SMEs are more likely to face higher costs for bank credits or loans and higher rejection rates than larger fi rms.…”

Análisis De Los Obstáculos Financieros De Las Pymes Para La Obtención De Crédito Y Las Variables Que Lo Facilitan

“…Los diferenciales de tasas de préstamos entre empresas grandes y pequeñas son sorprendentes, comenta Dietrich (2010), inicialmente se da como resultado de la poca eficiencia en pequeñas empresas. De acuerdo a su estudio no solo la falta de información es causante de dichos costos de Análisis de los obstáculos financieros de las pymes para la obtención de crédito y las variables que lo facilitan…”

“…Además, Dietrich (2010) hacen mención sobre como influye el aumentar la información de la empresa sobre los costos del crédito.…”

“…Considera que el tamaño del crédito va en función del tamaño de la empresa; menciona que los costos de financiamiento del banco no van en función del tamaño de la empresa; además considera que los costos por rechazo de la solicitud debieran adicionarse; en cuanto a la utilidad del banco señala que esta es Derivado de este modelo Dietrich (2010), establece varias hipótesis, entre las que se encuentran: hay una correlación negativa entre el tamaño del crédito y la tasa de interés; entre más pequeño el crédito mayor los costos del mismo. Aspecto interesante de nuestro estudio, es la relación entre el crédito y la tasa, aunque nosotros nos basaremos entre el costo mismo del crédito y la tasa del crédito.…”