The Financial Crisis, Bank Lending and UK Productivity: Sectoral and Firm-Level Evidence

Riley, Rebecca; Rosazza-Bondibene, Chiara; Young, Garry

doi:10.1177/002795011422800103

Cited by 20 publications

(18 citation statements)

References 17 publications

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“…Our findings echo those of other researchers who report a particular increase in constraints for large firms during the crisis period(Hetland and Mjøs 2012). Our results concerning different patterns of finance constraints for small and large firms are consistent withRiley et al (2014b) who find that bank credit constraints for large firms ended several years after the onset of the crisis while small firms experienced continuing constraints. Our findings on SMEs are somewhat at odds with…”

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confidence: 91%

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Financial constraints on investment: Effects of firm size and the financial crisis

Driver

Muñoz-Bugarin

2019

Research in International Business and Finance

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We estimate the effect of external financial constraints on fixed investment intentions for UK manufacturing by size of firm distinguishing between normal effects and those since the financial crisis began in the UK in 2007. Our financial constraints data are constructed to reflect only supply-side influences i.e., they are independent of cyclical conditions that may affect the demand for credit. Using consistent quarterly long run survey data with IV estimation, we find that, only for the crisis period, are financial constraints important for large firms and then only for periods of falling business optimism. By contrast, small firms experienced continuous constraint but with no additional supply side effect during the crisis. A policy implication for the UK is that the key to resumed lending to SMEs may lie, not so much with bank behaviour as with the demand conditions that these firms face, in particular, the sustainability and certainty of demand.

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confidence: 91%

“…"The cost of new [Bank] borrowing relative to Bank Rate peaked in around early 2009 and has since declined, albeit with a further rise in 2011 and 2012 in response to the effects of the Euro Area crisis on UK banks." (Riley et al 2014b).…”

Section: Endnotesmentioning

confidence: 99%

Financial constraints on investment: Effects of firm size and the financial crisis

Driver

Muñoz-Bugarin

2019

Research in International Business and Finance

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“…Although our data include indicators of many potential drivers of firm performance, they do not include some drivers that are argued to be important in the literature. One such is access to credit, which became more difficult for SMEs in the aftermath of the financial crisis, albeit without clear evidence of a depressing effect on productivity (Riley et al, 2014). Another absentee is a measure of firms' growth ambitions, although the available evidence suggests that these are not strongly predictive of actual growth outcomes once other characteristics are controlled for (Department for Business Innovation and Skills, 2016).…”

Section: Analytical Approachmentioning

confidence: 99%

Management practices and SME performance

Forth

Bryson

2019

Scottish J Political Eco

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We examine the association between management practices and SME performance in Britain over the period 2011–2015, using a unique dataset which links survey data on management practices with firm performance data from the UK's official business register. We find that SMEs are less likely to use formal management practices than larger firms. However, such practices appear to have demonstrable benefits for those SMEs who use them, being positively associated with firm survival, growth and productivity. Our results add further weight to policy initiatives which seek to encourage SMEs to improve their management skills and capabilities.

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“…Since our study analyses contemporary profitability of banks in the UK, it also considers the effect of the global financial crisis. We feel that the impact of the latter on profitability from lending activities in UK banks is another under-researched area (other studies include Riley et al, (2014) and Bolt et al (2012). This analysis of UK banks' financial performance and of the factors that might have shaped their business models and their overall risk appetite may be of interest to bankers, regulators and policy makers.…”

Section: Introductionmentioning

confidence: 97%

Business lending and bank profitability in the UK

Ekpu

Paloni

2016

SEF

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Purpose -The purpose of this paper is to investigate the importance of business lending as a source of bank profits in the UK banking system. The paper also examines whether the profitability of business lending is mostly driven by heterogeneous characteristics of individual banks or whether it is affected by systematic characteristics such as bank size and ownership structure. Findings: Our empirical results show that business lending is a statistically significant determinant of bank profits. However, this average effect masks important systematic differences among banks. In particular, we find strong size effects: the profitability of business lending is considerable for small banks but negligible for large banks. In contrast, we could not detect any ownership effects for domestic and foreign banks. These findings persist when the occurrence of the financial crisis is accounted for.Research limitations/implications: Interestingly, our study relates these findings to the process of financialisation. Yet, the extent of the latter and its impact on various groups of banks (i.e., large, small, domestic and foreign banks) have not been examined. Further research in this area would make an important contribution to the literature.Practical Implications: Our findings suggest that business lending is not a driving factor of profitability for large banks. One possible policy implication -which may be of interest especially to regulators and policy makers -is that capital injections into the larger banks per se are unlikely to lead to an expansion of credit to business. Originality/Value: There is very little research in the literature on the questions addressed in this paper, especially for the UK banking system. Moreover, the process of financialisation, which motivates the enquiry of this paper, is a growing area of research. Thus, the contribution of this paper is twofold.

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The Financial Crisis, Bank Lending and UK Productivity: Sectoral and Firm-Level Evidence

Cited by 20 publications

References 17 publications

Financial constraints on investment: Effects of firm size and the financial crisis

Financial constraints on investment: Effects of firm size and the financial crisis

Management practices and SME performance

Business lending and bank profitability in the UK

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