Legal-Institutional Environment, Social Capital and the Cost of Bank Financing for SMEs: Evidence from the Euro Area

Emma Galli, Danilo V. Mascia and Stefania P. S. Rossi ()
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Emma Galli: Sapienza University of Rome
Danilo V. Mascia: University of Cagliari
Stefania P. S. Rossi: University of Cagliari

Chapter 3 in Access to Bank Credit and SME Financing, 2017, pp 59-81 from Palgrave Macmillan

Abstract: Abstract This chapter addresses the question of whether a country’s legal-institutional and social environment affects the cost of bank financing for SMEs. We employ 22,295 firm-level observations drawn from the ECB SAFE from 2009 to 2013 as a sample of eleven euro area countries. After controlling for firm characteristics and macroeconomic features, we find that a less efficient judicial system as well as a higher degree of concentration of the banking industry increases the cost of funding for SMEs; the latter is instead reduced when the market share of cooperative banks and social capital are higher. Overall, we provide evidence that a better institutional and social environment produces positive externalities in the credit market, thereby favouring the cost of bank financing for SMEs.

Keywords: Cost of bank financing; SMEs; Legal and institutional contexts; Social capital (search for similar items in EconPapers)
Date: 2017
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Persistent link: https://EconPapers.repec.org/RePEc:pal:pmschp:978-3-319-41363-1_3

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DOI: 10.1007/978-3-319-41363-1_3

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