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SMEs and access to bank credit: Evidence on the regional propagation of the financial crisis in the UK

Hans Degryse (), Kent Matthews () and Tianshu Zhao

No E2015/5, Cardiff Economics Working Papers from Cardiff University, Cardiff Business School, Economics Section

Abstract: We study the sensitivity of banks’ credit supply to small and medium size enterprises (SMEs) in the UK to banks’ financial condition before and during the financial crisis. Employing unique data on the geographical location of all bank branches in the UK, we connect firms’ access to bank credit to the financial condition (i.e., bank health and the use of core deposits) of all bank branches in the vicinity of the firm over the period 2004-2011. Before the crisis, banks’ local financial conditions did not influence credit availability irrespective of the functional distance (i.e., the distance between bank branch and bank headquarters). However, during the crisis, we find that SMEs with in their vicinity banks that have stronger financial condition face greater credit availability when the functional distance is low. Our results point to a “flight to headquarters” effect during the financial crisis.

Keywords: financial crisis; credit supply; flight to headquarters; flight to quality; bank organization (search for similar items in EconPapers)
JEL-codes: G21 G29 L14 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-ban, nep-bec, nep-cfn, nep-ent, nep-eur and nep-sbm
Date: 2015-06
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Related works:
Journal Article: SMEs and access to bank credit: Evidence on the regional propagation of the financial crisis in the UK (2018) Downloads
Working Paper: SMEs and access to bank credit: Evidence on the regional propagation of the financial crisis in the UK (2015) Downloads
Working Paper: SMEs and Access to Bank Credit: Evidence on the Regional Propagation of the Financial Crisis in the UK (2015) Downloads
Working Paper: SMEs and access to bank credit: Evidence on the regional propagation of the financial crisis in the UK (2015) Downloads
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