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Banking stability and borrower discouragement: a multilevel analysis for SMEs in the EU-28

Author

Listed:
  • Ana Mol-Gómez-Vázquez

    (Universidad de Alicante)

  • Ginés Hernández-Cánovas

    (Universidad Politécnica de Cartagena)

  • Johanna Koëter-Kant

    (Vrije Universiteit Amsterdam)

Abstract

The promotion of a more stable European banking system has become a priority which, not doubt, will bring important benefits to firms. However, bank stability comes with stronger regulations that could harm the access to finance of small and medium-sized enterprises (SMEs), which are highly dependent on bank financing. We provide new evidence on the association between the stability of a country’s banking system and SMEs access to finance through the study of borrower discouragement. We analyze 20,207 observations gathered among 16,382 firms operating in the EU-28 during the period 2011–2018. Applying multilevel methodology, our results show that SMEs operating in countries with more stable banking systems are less likely to be discouraged from applying for a loan. Working to achieve a more stable banking system does not seem to harm the access to finance of SMEs.

Suggested Citation

  • Ana Mol-Gómez-Vázquez & Ginés Hernández-Cánovas & Johanna Koëter-Kant, 2022. "Banking stability and borrower discouragement: a multilevel analysis for SMEs in the EU-28," Small Business Economics, Springer, vol. 58(3), pages 1579-1593, March.
    • Handle: RePEc:kap:sbusec:v:58:y:2022:i:3:d:10.1007_s11187-021-00457-w
    DOI: 10.1007/s11187-021-00457-w
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