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Reduced cross-border lending and financing costs of SMEs

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  • Bremus, Franziska
  • Neugebauer, Katja

Abstract

This paper investigates how the withdrawal of banks from their cross-border business impacted the borrowing costs of European firms since the crisis. We combine aggregate information on total and cross-border credit with firm-level survey data for the period 2010–2014. We find that the decline in cross-border lending led to a deterioration in the borrowing conditions of small firms. In countries with more pronounced reductions in cross-border credit inflows, the likelihood of a rise in firms’ external financing costs increased. This result is mainly driven by the interbank channel, which plays a crucial role in transmitting shocks to the real sector across borders.

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  • Bremus, Franziska & Neugebauer, Katja, 2018. "Reduced cross-border lending and financing costs of SMEs," Journal of International Money and Finance, Elsevier, vol. 80(C), pages 35-58.
    • Handle: RePEc:eee:jimfin:v:80:y:2018:i:c:p:35-58
    DOI: 10.1016/j.jimonfin.2017.09.006
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    5. Ren, Xiaohang & Qin, Jianing & Jin, Chenglu & Yan, Cheng, 2022. "Global oil price uncertainty and excessive corporate debt in China," Energy Economics, Elsevier, vol. 115(C).
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    8. Müting, Miriam, 2019. "Multinational banking: The crisis and its policy response," VfS Annual Conference 2019 (Leipzig): 30 Years after the Fall of the Berlin Wall - Democracy and Market Economy 203647, Verein für Socialpolitik / German Economic Association.
    9. Kneer, Christiane & Raabe, Alexander, 2019. "Tracking foreign capital: the effect of capital inflows on bank lending in the UK," Bank of England working papers 804, Bank of England.
    10. Sebastian Doerr & Philipp Schaz, 2018. "Bank loan supply during crises: the importance of geographic diversification," ECON - Working Papers 288, Department of Economics - University of Zurich, revised Mar 2019.
    11. Garcia Revelo, José David & Lucotte, Yannick & Pradines-Jobet, Florian, 2020. "Macroprudential and monetary policies: The need to dance the Tango in harmony," Journal of International Money and Finance, Elsevier, vol. 108(C).
    12. Doerr, Sebastian & Schaz, Philipp, 2021. "Geographic diversification and bank lending during crises," Journal of Financial Economics, Elsevier, vol. 140(3), pages 768-788.
    13. Raffaella Calabrese & Claudia Girardone & Alex Sclip, 2021. "Financial fragmentation and SMEs’ access to finance," Small Business Economics, Springer, vol. 57(4), pages 2041-2065, December.
    14. Alessandro Barbera & Áron Gereben & Marcin Wolski, 2022. "Estimating conditional treatment effects of EIB lending to SMEs in Europe," BIS Working Papers 1006, Bank for International Settlements.
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    More about this item

    Keywords

    International banking; Firm finance; Credit constraints;
    All these keywords.

    JEL classification:

    • F34 - International Economics - - International Finance - - - International Lending and Debt Problems
    • F36 - International Economics - - International Finance - - - Financial Aspects of Economic Integration
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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