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Distances and Small Business Credit Constraints: The French case

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  • Salima Djedidi Kooli

    () (LEDA – SDFi, Université Paris-Dauphine, Place du Maréchal de Lattre de Tassigny, 75775 Paris CEDEX 16, France)

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    Abstract

    Deregulation and progress in information and communication technologies have increased the geographical expansion of banking structures and instruments. This makes banks operationally close to the borrowers. At the same time, banking industry consolidation have induced a geographical concentration of banking decision centers and strategic functions, leading to an increase of the functional distance that separates the decision center of a bank from its operational branches. The aim of this paper is to evaluate the impact of these two trends on small and medium-sized enterprise (SME) lending. Our findings on French data suggest that (i) increased functional distance induces an increase of the investment cash flow sensitivity considered as a measure of financing constraints and that (ii) the relationship between operational proximity and financing constraints is non linear with an investment-cash flow relationship supposed to be increasing for low levels of operational proximity below a certain threshold and decreasing for high levels of it. The adverse effect of functional distance on financing constraints is particularly acute for small firms.

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    File URL: http://www.ijesar.org/docs/volume5_issue3/small_business_credit_constraints.pdf
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    Bibliographic Info

    Article provided by Technological Educational Institute (TEI) of Kavala, Greece in its journal International Journal of Economic Sciences and Applied Research (IJESAR).

    Volume (Year): 5 (2012)
    Issue (Month): 3 (December)
    Pages: 81-114

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    Handle: RePEc:tei:journl:v:5:y:2012:i:3:p:81-114

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    Related research

    Keywords: SME lending; functional distance; operational proximity; financing constraints; investment-cash flow sensitivity;

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