Financial constraints of private firms and bank lending behavior

Patrick Behr, Lars Norden and Felix Noth

Journal of Banking & Finance, 2013, vol. 37, issue 9, 3472-3485

Abstract: We investigate whether and how financial constraints of private firms depend on bank lending behavior. Bank lending behavior, especially its scale, scope and timing, is largely driven by bank business models which differ between privately owned and state-owned banks. Using a unique dataset on private small and medium-sized enterprises (SMEs) we find that an increase in relative borrowings from local state-owned banks significantly reduces firms’ financial constraints, while there is no such effect for privately owned banks. Improved credit availability and private information production are the main channels that explain our result. We also show that the lending behavior of local state-owned banks can be sustainable because it is less cyclical and neither leads to more risk taking nor underperformance.

Keywords: Financial constraints; Bank loans; Bank business models; Relationship lending; Cyclicality (search for similar items in EconPapers)
JEL-codes: D21 G21 G32 L21 L30 (search for similar items in EconPapers)
Date: 2013
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (70)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jbfina:v:37:y:2013:i:9:p:3472-3485

DOI: 10.1016/j.jbankfin.2013.05.018

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