Relationship banking and regional SME financing: the case of Wales

Abstract

Regional disparities in credit availability across the UK have been highlighted in a series of studies as a factor affecting both new firm starts and small firm growth prospects. This paper suggests that relationship banking might be an important means of attenuating differences in credit availability. The paper focuses on the value of relationship banking to SMEs in Wales in the period following the global banking crisis. The results show that SMEs that had developed a customer-loan relationship with their banks had a lower probability of experiencing a worsened credit outcome than those that did not. The implications of the findings for regional finance provision are discussed.

Place-based entrepreneurs and their competitiveness: a relational perspective on small regional banks

“…The fact that trust is an outcome of relationship banking is confirmed for Italian start-up entrepreneurs (Howorth and Moro, 2006). Moreover, these findings from this case study are in line with Degryse et al (2017), who show that relationship banking is associated with better credit conditions for SMEs, notably in the post-2007/2008 crisis times.…”

“…Although small regional banks are limited to and dependent on regional markets, they use place as a factor to strategically develop and sustain their place-based business model. These findings are in line with evidence from other European countries about small, regional or nichebased banks and their competitiveness respectively role in fostering regional financing, notably for SMEs (Hasan et al 2019;Degryse et al 2017;Hakenes et al 2015;Fiordelisi and Mare 2014;Howorth and Moro 2006).…”

Synergistic model to boost business performance: a New Zealand case study

“…Indeed, firm and bank connections may reduce information asymmetry and assist bankers to evaluate the financial health of businesses (Boulanouar et al , 2020), most effectively when trust is built between entrepreneurs and bankers, by improving access to finance and reducing borrowing costs (Hernández-Cánovas and Martínez-Solano, 2010). Symbiotic associations also assist banks to reduce the probability of credit outcome deterioration (Degryse et al , 2017).…”

Cash flow sensitivities and bank-finance shocks in non-listed firms

“…For small firms, having a bank relationship is an important determinant of their ability to borrow. Degryse et al (2017) shows that firms with a bank relationship were less susceptible to the financial crisis of 2007. 3…”