Does “small bank advantage” really exist? Evidence from China

Xiao-mei Zhang, Zhuo-lin Song and Zhen Zhong

International Review of Economics & Finance, 2016, vol. 42, issue C, 368-384

Abstract: A small bank advantage indicates that small banks have a comparative advantage in granting relationship lending to small- and medium-sized enterprises (SMEs). This paper used loan data from Chinese SMEs to test this hypothesis during a financial crisis and during non-crisis times. Compared with large banks, small banks are only superior in offering SMEs relationship lending through a pre-existing relationship, regardless of the financial crisis. Without pre-existing relationships, small and large banks have no advantage in providing loans to SMEs. We also find that there is no significant positive association between bank size and whether an SME changes its lending bank or the number of its financing sources, regardless of whether there is currently a financial crisis. The results indicate that small banks fail to maintain a strong relationship with SMEs, possibly because of the hold-up problem resulting from relationship lending.

Keywords: Bank size; Financial crisis; Small bank advantage; Soft information; Relationship lending t; echnology (search for similar items in EconPapers)
JEL-codes: D82 G21 L29 (search for similar items in EconPapers)
Date: 2016
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S1059056015001598
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:reveco:v:42:y:2016:i:c:p:368-384

DOI: 10.1016/j.iref.2015.10.009

Access Statistics for this article

International Review of Economics & Finance is currently edited by H. Beladi and C. Chen

More articles in International Review of Economics & Finance from Elsevier
Bibliographic data for series maintained by Catherine Liu ().