Bank Size and Small- and Medium-sized Enterprise (SME) Lending: Evidence from China

Yan Shen, Minggao Shen, Zhong Xu and Ying Bai

World Development, 2009, vol. 37, issue 4, pages 800-811

Abstract: Summary Using panel data collected in 2005, we evaluate how bank size, discretion over credit, incentive schemes, competition, and the institutional environment affect lending to small- and medium-sized enterprises in China. We deal with the endogeneity problem using instrumental variables, and a reduced-form approach is also applied to allow for weak instruments in estimation. We find that total bank asset is an insignificant factor for banks' decision on small- and medium-enterprise (SME) lending, but more local lending authority, more competition, carefully designed incentive schemes, and stronger law enforcement encourage commercial banks to lend to SMEs.

Keywords: SME; lending; bank; size; loan; approval; rights; reduced-form; approach; soft; information (search for similar items in EconPapers)
Date: 2009

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