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Bank Market Power and SME Financing Constraints

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  • Santiago Carbó-Valverde
  • Francisco Rodríguez-Fernández
  • Gregory F. Udell

Abstract

Some studies find that market power is associated with credit availability (information hypothesis); others find that less competitive banking markets lead to more credit rationing (market power hypothesis). Empirical research has relied solely on concentration as a measure of market power. The industrial organization literature, however, argues that a structural competition indicator such as the Lerner index is a superior measure. We test the information hypothesis and the market power hypothesis using these two alternative measures of market power and find that they generally give conflicting results. However, we also offer evidence suggesting that both views can be reconciled. Copyright 2009, Oxford University Press.

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Bibliographic Info

Article provided by European Finance Association in its journal Review of Finance.

Volume (Year): 13 (2009)
Issue (Month): 2 ()
Pages: 309-340

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Handle: RePEc:oup:revfin:v:13:y:2009:i:2:p:309-340

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Cited by:
  1. Masaji Kano & Hirofumi Uchida & Gregory F. Udell & Wako Watanabe, 2006. "Information Verifiability, Bank Organization, Bank Competition and Bank-Borrower Relationships," Discussion papers 06003, Research Institute of Economy, Trade and Industry (RIETI).
  2. MariaJosé Palacin-Sanchez & Filippo di Pietro, 2013. "Are Regional Institutional Factors Determinants Of The Capital Structure Of Smes?," ERSA conference papers ersa13p498, European Regional Science Association.
  3. Hasan, Iftekhar & Marinc , Matej, 2013. "Should competition policy in banking be amended during crises? Lessons from the EU," Research Discussion Papers 7/2013, Bank of Finland.
  4. Presbitero, Andrea F. & Zazzaro, Alberto, 2011. "Competition and relationship lending: Friends or foes?," Journal of Financial Intermediation, Elsevier, vol. 20(3), pages 387-413, July.
  5. Chong, T.T.L. & Lu, L. & Ongena, S., 2011. "Does Banking Competition Alleviate or Worsen Credit Constraints Faced by Small and Medium Enterprises? Evidence from China (Replaced by CentER DP 2012-013)," Discussion Paper 2011-006, Tilburg University, Center for Economic Research.
  6. Behr, Patrick & Norden, Lars & Noth, Felix, 2013. "Financial constraints of private firms and bank lending behavior," Journal of Banking & Finance, Elsevier, vol. 37(9), pages 3472-3485.
  7. Hakenes , Hendrik & Hasan, Iftekhar & Molyneux, Phil & Xie , Ru, 2014. "Small banks and local economic development," Research Discussion Papers 5/2014, Bank of Finland.
  8. FitzGerald, John & Kearney, Ide & Bergin, Adele & Conefrey, Thomas & Duffy, David & Timoney, Kevin & Znuderl, Nusa, 2013. "Medium-Term Review: 2013-2020, No. 12," Forecasting Report, Economic and Social Research Institute (ESRI), number MTR12, March.
  9. Kremp, E. & Sevestre, P., 2012. "Did the crisis induce credit rationing for French SMEs?," Working papers 405, Banque de France.
  10. Chong, T.T.L. & Lu, L. & Ongena, S., 2012. "Does Banking Competition Alleviate or Worsen Credit Constraints Faced by Small and Medium Enterprises? Evidence from China (Replaces CentER DP 2011-006)," Discussion Paper 2012-013, Tilburg University, Center for Economic Research.
  11. Carbo Valverde, S. & Degryse, H.A. & Rodriguez-Fernandez, F., 2011. "Lending relationships and credit rationing: the impact of securitization," Discussion Paper 2011-128, Tilburg University, Center for Economic Research.
  12. Morgan, Horatio M., 2013. "Foreign banks and the export performance of emerging market firms: Evidence from India," Research in International Business and Finance, Elsevier, vol. 29(C), pages 52-60.
  13. Annie bellier & Wafa Sayeh & Stéphanie Serve, 2012. "What lies behind credit rationing? A survey of the literature," THEMA Working Papers 2012-39, THEMA (THéorie Economique, Modélisation et Applications), Université de Cergy-Pontoise.
  14. Chong, Terence Tai-Leung & Lu, Liping & Ongena, Steven, 2013. "Does banking competition alleviate or worsen credit constraints faced by small- and medium-sized enterprises? Evidence from China," Journal of Banking & Finance, Elsevier, vol. 37(9), pages 3412-3424.
  15. María Palacín-Sánchez & Luis Ramírez-Herrera & Filippo di Pietro, 2013. "Capital structure of SMEs in Spanish regions," Small Business Economics, Springer, vol. 41(2), pages 503-519, August.
  16. Ogura, Yoshiaki, 2012. "Lending competition and credit availability for new firms: Empirical study with the price cost margin in regional loan markets," Journal of Banking & Finance, Elsevier, vol. 36(6), pages 1822-1838.
  17. Mariya Hake, 2012. "Banking Sector Concentration and Firm Indebtedness: Evidence from Central and Eastern Europe," Focus on European Economic Integration, Oesterreichische Nationalbank (Austrian Central Bank), issue 3.

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