 Lending competition and credit availability for new firms: Empirical study with the price cost margin in regional loan marketsJournal of Banking & Finance, 2012, vol. 36, issue 6, 1822-1838 Abstract: In this paper, I present statistical evidence of the impact of lending competition on credit availability for new firms. A discrete-time duration analysis with respect to the years from the start-up to the first loan approval by a commercial bank or a cooperative bank, which is collected from survey data in Japan, shows that the higher price cost margin (PCM) of banks, which reflects the existence of a quasi-rent for a bank, improves the credit availability for younger firms. Additional analysis to detect the regional determinants of the PCM of banks shows that the share of larger banks in each local credit market has a negative and significant impact on the PCM. In light of the existing empirical finding that smaller banks are more likely to provide relationship banking, these findings provide indirect evidence for the hypothesis that the intensity of relationship banking in each local credit market increases the PCM and this encourages banks to extend a loan to new firms so that they can pre-empt the opportunity to establish lending relationships that are expected to yield such quasi-rents. Keywords: Credit availability; Lending competition; Relationship banking; Small business finance (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:jbfina:v:36:y:2012:i:6:p:1822-1838 DOI: 10.1016/j.jbankfin.2012.02.006 Access Statistics for this article Journal of Banking & Finance is currently edited by Ike Mathur More articles in Journal of Banking & Finance from Elsevier |
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