Mariarosaria Agostino Damiano B. Silipo Francesco Trivieri
Abstract
In this paper, we seek to empirically assess which determinants of the capability and incentives of banks to screen and monitor firms are significant in explaining credit rationing to Italian SMEs. After testing for the presence of non-random selection bias and the potential endogeneity of some determinants of interest, the probit model results we obtain suggest that the average banking size and the multiple banking relationship phenomenon are statistically significant factors affecting credit rationing, presumably through their impact on the aforementioned banks' capability and incentives. Other potential determinants of banks' incentives to monitor and screen, such as local banking competition and firm' capacity to collateralize, are never significant. However, when we split the sample according to the level of competition in credit markets, we find that the estimated marginal effects of all significant determinants of interest are larger in absolute value than those obtained when using the whole sample. Copyright 2008 The Authors Journal compilation 2008 Banca Monte dei Paschi di Siena SpA.
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Article provided by Banca Monte dei Paschi di Siena SpA in its journal Economic Notes.
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