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Gregory F Udell - One of the best experts on this subject based on the ideXlab platform.

  • SME Financing and the financial crisis a framework and some issues
    2011
    Co-Authors: Gregory F Udell
    Abstract:

    Studies of net job creation generally confirm the importance of the SME sector as an engine that can drive the economy out of a recession. The SME sector cannot perform this role without access to external finance. This article examines new paradigms that have expanded our understanding of how SME loans are underwritten and how underwriting changes during a macro financial shock. We also use these paradigms to examine two interesting issues related to SME Financing during the current financial crisis: the behavior of foreign-owned banks particularly in developing economies and the efficacy of government guarantee programs.

  • bank market power and SME Financing constraints
    Review of Finance, 2009
    Co-Authors: Santiago Carbovalverde, Francisco Rodriguezfernandez, Gregory F Udell
    Abstract:

    Theoretical models of lending and industrial organization theory predict that firm access to credit depends critically on bank market structure. However, empirical studies offer mixed results. Some studies find that higher concentration is associated with higher credit availability consistent with the information hypothesis that less competitive banks have more incentive to invest in soft information. Other empirical studies, however, find support for the market power hypothesis that credit rationing is higher in less competitive bank markets. This study tests these two competing hypotheses by employing for the first time a competition indicator from the Industrial Organization literature – the Lerner index – as an alternative to traditional measures of concentration. We test the information and the market power hypotheses using alternative measures and firm borrowing constraints. We find that the results are sensitive to the choice between IO margins and traditional concentration measures. In particular, the HHI seems to support the information hypothesis while the Lerner index supports the market power hypothesis. The Lerner index, however, is found to be a more consistent indicator of market power across different measures of Financing constraints. Moreover, the Lerner index is found to exhibit the larger marginal effect on the probability that a firm is financially constrained among a large set of firm level, bank market and environmental control variables. Our results are robust to alternative measures of financial constraints and cast doubt on the validity of relying on concentration measures as proxies of competition in corporate lending relationships (247 words).

  • bank market power and SME Financing constraints
    Review of Finance, 2009
    Co-Authors: Santiago Carbovalverde, Francisco Rodriguezfernandez, Gregory F Udell
    Abstract:

    Some studies find that market power is associated with credit availability (information hypothesis); others find that less competitive banking markets lead to more credit rationing (market power hypothesis). Empirical research has relied solely on concentration as a measure of market power. The industrial organization literature, however, argues that a structural competition indicator such as the Lerner index is a superior measure. We test the information hypothesis and the market power hypothesis using these two alternative measures of market power and find that they generally give conflicting results. However, we also offer evidence suggesting that both views can be reconciled. Copyright 2009, Oxford University Press.

  • Bank market power and SME Financing constraints
    Review of Finance, 2009
    Co-Authors: Santiago Carb-valverde, Francisco Rodrguez-fernndez, Gregory F Udell
    Abstract:

    Some studies find that higher bank concentration is associated with higher credit availability (information hypothesis) while others maintain that credit rationing is higher in less competitive bank markets (market power hypothesis). This study tests these two competing hypotheses by employing for the first time a competition indicator from the Industrial Organization literature - the Lerner index - as an alternative to concentration measures. The results are sensitive to the choice of market power indicators. The Lerner index is found to be the more consistent indicator and exhibit the larger (and positive) marginal effect on the probability that a firm is financially constrained.

  • SME Financing and the deployment of lending technologies in japan
    Social Science Research Network, 2007
    Co-Authors: Hirofumi Uchida, Nobuyoshi Yamori, Gregory F Udell
    Abstract:

    The current literature on SME loan underwriting assumes that banks use just one of two lending technologies: relationship lending for opaque SMEs and transactions-based lending for relatively transparent SMEs. Recent work has departed from this view and hypothesizes that banks use a variety of distinctly different lending technologies. It emphasizes that the typical SME bank loan is underwritten primarily based on just one of these technologies and that many different transactions-based technologies are well-suited for opaque SMEs (e.g., Berger and Udell 2006). We test these propositions using data on Japanese SMEs and find that although financial statement lending is the most commonly used lending technology and serves as a kind of basic technology, it tends not to be used to the exclusion of other technologies. We also find evidence that the deployment of different lending technologies does not vary across different bank types. These findings imply that, at least in Japan, SME lending practice is generally inconsistent with much of the academic research on how banks underwrite loans.

Mohammad Siddiquee - One of the best experts on this subject based on the ideXlab platform.

  • revisiting SME Financing in bangladesh
    Social Science Research Network, 2006
    Co-Authors: K Zahidul M Islam, Masud Ibn Rahman, Mohammad Siddiquee
    Abstract:

    Small and Medium Enterprise (SME) Financing is a topic of significant research interest to academics and an issue of great importance to the policy makers around the world. Economic, as well as technical and social arguments warrant the promotion of SMEs, as they create large scale, low-cost employment opportunities, use locally available inputs and technologies, mobilize small and scattered private savings, develop entrepreneurship, and correct the regional imbalance in development that exists in developing countries. Despite all these potentials, SMEs are disappearing, abandoning the potential role they could have played in economic development. Several studies have identified the major obstacles that include, but not limited to, Financing, infrastructure facilities, taxes and regulations and stability in policies. This paper focuses on the financial constraints in Bangladesh. In Bangladesh, among the formal sources, commercial banks are not interested because of the high risk and high supervision cost associated with this type of Financing. Absence of sound collateral puts SMEs at a relative disadvantage. However, we have found that some of the commercial banks have some 'innovative' products or services targeting at SMEs only, while others have 'repackaged' some of their existing products as SME products. The contribution of commercial banks is meager except BASIC Bank Ltd. and BRAC Bank Ltd. It has been observed in the study that commercial banks disburse loans to this sector only when government introduces 'credit guarantee scheme' in different capacity. 'Relationship lending technologies' should be introduced in case of the existing 'transaction lending technologies'.

Zena Zhu - One of the best experts on this subject based on the ideXlab platform.

  • The Analysis of Industry Website on the SME Financing
    2011 International Conference on Internet Technology and Applications, 2011
    Co-Authors: Jin Nie, Zena Zhu
    Abstract:

    SMEs Financing problems have been a critical issue in SMEs research field for a long time. The fast development of Internet provides a new finance channel for small and medium sized enterprises. Establishing industry websites to support SMEs Financing created a new methodology for firms fund raising. This paper analyzed the Financing problems for Chinese SMEs in commercial banks. Based on our study, Financing for SMEs should be market oriented activities, it pointed out that implement Internet technology will be an effective way to improve Chinese SME Financing situation.

K Zahidul M Islam - One of the best experts on this subject based on the ideXlab platform.

  • revisiting SME Financing in bangladesh
    Social Science Research Network, 2006
    Co-Authors: K Zahidul M Islam, Masud Ibn Rahman, Mohammad Siddiquee
    Abstract:

    Small and Medium Enterprise (SME) Financing is a topic of significant research interest to academics and an issue of great importance to the policy makers around the world. Economic, as well as technical and social arguments warrant the promotion of SMEs, as they create large scale, low-cost employment opportunities, use locally available inputs and technologies, mobilize small and scattered private savings, develop entrepreneurship, and correct the regional imbalance in development that exists in developing countries. Despite all these potentials, SMEs are disappearing, abandoning the potential role they could have played in economic development. Several studies have identified the major obstacles that include, but not limited to, Financing, infrastructure facilities, taxes and regulations and stability in policies. This paper focuses on the financial constraints in Bangladesh. In Bangladesh, among the formal sources, commercial banks are not interested because of the high risk and high supervision cost associated with this type of Financing. Absence of sound collateral puts SMEs at a relative disadvantage. However, we have found that some of the commercial banks have some 'innovative' products or services targeting at SMEs only, while others have 'repackaged' some of their existing products as SME products. The contribution of commercial banks is meager except BASIC Bank Ltd. and BRAC Bank Ltd. It has been observed in the study that commercial banks disburse loans to this sector only when government introduces 'credit guarantee scheme' in different capacity. 'Relationship lending technologies' should be introduced in case of the existing 'transaction lending technologies'.

Frank Lang - One of the best experts on this subject based on the ideXlab platform.

  • European SME Financing: An Empirical Taxonomy
    Contemporary Developments in Entrepreneurial Finance, 2020
    Co-Authors: Christian Masiak, Alexandra Moritz, Frank Lang
    Abstract:

    This study investigates Financing patterns of European SMEs by looking at a large number of different Financing instruments and their complementary and substitutive effects, using the SAFE dataset collected in 2015. We develop an empirical taxonomy of SME Financing patterns in Europe to analyse SME Financing, applying cluster analyses. Our cluster analysis identifies seven distinct SME Financing types based on the Financing instruments used: mixed-financed SMEs with focus on other loans, mixed-financed SMEs with focus on retained earnings or sale of assets, state-subsidised SMEs, debt-financed SMEs, trade-financed SMEs, asset-based financed SMEs and internally financed SMEs. Moreover, the SME Financing types can not only be profiled according to their firm-, product-, industry- and country-specific characteristics but also to macroeconomic variables. Our findings can support policy makers in assessing the impact of changes in policy measures for SME Financing.

  • Financing Patterns of European SMEs Revisited: An Updated Empirical Taxonomy and Determinants of SME Financing Clusters
    2017
    Co-Authors: Christian Masiak, Alexandra Moritz, Frank Lang
    Abstract:

    This EIF Working Paper investigates Financing patterns of European SMEs by looking at a large number of different Financing instruments and their complementary and substitutive effects, using the SAFE dataset collected in 2015. We develop an empirical taxonomy of SME Financing patterns in Europe, applying cluster analyses. In order to investigate the cluster stability over time, we replicate an approach by Moritz et al. (2016)2, who used the SAFE data from 2013. In addition, we extend that study by looking at the role of the country-specific macroeconomic and institutional environment for the Financings patterns of SMEs. Our results confirm the results of Moritz et al. (2016) and show that European SME Financing is not homogenous, but that different Financing patterns exist. Our cluster analysis identifies seven distinct SME Financing types based on the Financing instruments used: mixed-financed SMEs with focus on other loans, mixed-financed SMEs with focus on retained earnings or sale of assets, state-subsidised SMEs, debt-financed SMEs, trade-financed SMEs, asset-based financed SMEs, and internally-financed SMEs. Moreover, the SME Financing types can be profiled according to their firm-, product-, industry-, and country-specific characteristics. Our findings can support policy makers in assessing the impact of changes in policy measures for SME Financing.

  • Access to funds: how could CMU support SME Financing?
    Vierteljahrshefte zur Wirtschaftsforschung, 2017
    Co-Authors: Helmut Kraemer-eis, Frank Lang
    Abstract:

    Summary: Many policy actions of the CMU have the objective to enhance access to finance for the so-called backbone of the European economy—the SMEs. The CMU aims at improving the framework conditions for SME Financing, at strengthening bank lending—as the most important external Financing source for SMEs— and to diversify the range of potential Financing sources for SMEs—for various financial instruments from debt to equity. This article explains the SME Financing-related objectives of the CMU by looking at the initiatives to enhance the lending capacity of banks, before it turns to the discussion of alternative Financing. Due to the multitude of links to SMEs, not all CMU elements can be tackled in the same detail, but we focus on some key areas like securitisation and venture capital—including latest regulatory developments. Zusammenfassung: Das Ziel vieler politischer Handlungsfelder der „Kapitalmarktunion“ ist es, den Finanzierungszugang fur kleine und mittlere Unternehmen (KMU), des sogenannten Ruckg...