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Does banking competition alleviate or worsen credit constraints faced by small- and medium-sized enterprises? Evidence from China

Author

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  • Chong, Terence Tai-Leung
  • Lu, Liping
  • Ongena, Steven

Abstract

Banking competition may enhance or hinder the financing of small and medium-sized enterprises. Using a survey on the financing of such enterprises in China, combined with detailed bank branch information, we investigate how concentration in local banking market affects the availability of credit. We find that lower market concentration alleviates financing constraints. The widespread presence of joint-stock banks has a larger effect on alleviating these constraints, than the presence of city commercial banks, while the presence of state-owned banks has a smaller effect.

Suggested Citation

  • 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.
  • Handle: RePEc:eee:jbfina:v:37:y:2013:i:9:p:3412-3424
    DOI: 10.1016/j.jbankfin.2013.05.006
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    References listed on IDEAS

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    Full references (including those not matched with items on IDEAS)

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    Keywords

    Banking competition; SME financing; Credit constraints;

    JEL classification:

    • D41 - Microeconomics - - Market Structure, Pricing, and Design - - - Perfect Competition
    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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