Institutional Determinants of the Use of Lending Technologies and Financial Constraint of SMEs in Seven European Countries (FE)
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2016-12-19
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en
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Abstract
This thesis uses a unique survey data set of over 14,000 SMEs from seven European countries to analyze the influence of institutional variables on the use of lending technology and financial constraint of SMEs. The analysis indicates that firms in countries with stronger investor protection, easier debt enforcement, better credit information, more individualism, and less bank competition, are more likely to engage in transactional lending. When these conditions are not present, social norms will become more important in the lending decision and SMEs will substitute for more implicit contracting through relational lending. Larger, older SMEs that have a longer
lasting relationship with their main bank engage more in relational lending, probably because an intensive relationship becomes more relevant at larger firm size. Another finding is that a stronger legal environment and more credit information decreases the probability of an SME being financially constrained. The influence of institutional variables on financial constraint does not differ between firms that use different lending technologies. Finally, larger, older, more profitable SMEs that have a longer lasting relationship with their main bank, are found to be less likely to be financially constrained.
Keywords: SME financing, transactional lending, relational lending, financial constraint,
institutional environment.
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Faculteit der Managementwetenschappen