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The ability of banks to lend to informationally opaque small businesses

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Author Info

  • Allen N. Berger
  • Leora F. Klapper
  • Gegory F. Udell

Abstract

We test hypotheses about the effects of bank size, foreign ownership, and distress on lending to informationally opaque small firms using a rich new data set on Argentinean banks, firms, and loans. We also test hypotheses about borrowing from a single bank versus multiple banks. Our results suggest that large and foreign-owned institutions may have difficulty extending relationship loans to opaque small firms. Bank distress appears to have no greater effect on small borrowers than on large borrowers, although even small firms may react to bank distress by borrowing from multiple banks, raising borrowing costs and destroying some relationship benefits.

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Bibliographic Info

Paper provided by Federal Reserve Bank of Chicago in its series Proceedings with number 709.

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Length: 241-261
Date of creation: 2001
Date of revision:
Publication status: Published in Conference on Bank Structure and Competition (2001 : 37th) ; The financial net: costs, benefits, and implications for regulation
Handle: RePEc:fip:fedhpr:709

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Keywords: Bank loans ; Banking market ; Small business;

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References

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