What Determines the Composition of Banks' Loan Portfolios? Evidence from Transition Countries

Which firms engage small, foreign, or state banks? And who goes Islamic? Evidence from Turkey

“…Possibly as a consequence of this correspondence between bank organization and usage of information, small (opaque) firms are found to borrow from small banks (Petersen and Rajan, 2002;Saunders and Allen, 2002), while large banks mainly lend to large firms employing predominantly hard information in the loan decision (Berger et al, 2005;Cole et al, 2004;Uchida et al, 2008;Strahan, 2008;de Haas et al, 2010). 1 However the firm size/bank size matching may be not be equally strong in all size classes and may be dependent on actual loan officer authority (Benvenuti et al, 2009) and bank ownership (Delgado et al, 2007).…”

“…Foreign banks are often large, centralized, have their headquarters abroad, and may therefore lack the organizational dexterity to successfully engage small and young firms which are considered to be particularly opaque (Stein, 2002;Berger et al, 2005). Their lack of ability to connect with these local firms may be particularly acute in emerging markets where creditor protection and contract enforcement are weak and where transparency is low (Pistor et al, 2000;Brown et al, 2009;de Haas et al, 2010).…”

“…Haselmann et al (2010) find that all banks, including the foreign ones, are more inclined to lend to small and medium enterprises if creditor protection is strong. While in de Haas et al (2010) foreign banks lend to large firms independently from the legal environment. Using the same firm directories we analyze in this paper, Giannetti and Ongena (2009b) show that foreign banks are more likely to engage large and foreign-owned firms (in the 13 emerging economies they study).…”

Bank involvement with SMEs: Beyond relationship lending

“…7 See DeYoung (2000, DeYoung and Hunter (2003), Carter et al (2004), andDeYoung et al (2004). While De Haas et al (2010) find that small banks are more likely to lend to SMEs relative to large banks in transition economies, they find no robust association between bank ownership and SME lending in these countries. 8 See, for example, Berger et al (1995Berger et al ( , 2001Berger et al ( , 2005Berger et al ( , 2008, Keeton (1995), Berger and Udell (1996), Strahan and Weston (1996), Haynes et al (1999), Cole et al (2004), Scott (2004), Cull et al (2006), Mian (2006), Craig and Hardee (2007), Francis et al (2008), and Jimenez et al (2009).…”

A computational approach to pricing a bank credit line

“…However, it is our intent to demonstrate that the model obtains numeric solutions to the FOCs and to establish the robustness of those solutions. If the model were employed to actually price a credit line for a loan applicant, the bank could utilize proprietary information to refine our suggestive values and stylize the model for their purposes (Agénor and El Aynaoui, 2010;Bastos, 2010;Calabrese and Zenga, 2010;DeHass et al, 2010;Jiménez et al, 2009;Khandani et al, 2010;Shehzad et al, 2010). 28 Newton's approach to the numeric solution of (24) was chosen for its simplicity and its convergence properties.…”