Credit granting to small firms: A Brazilian case
Transaction costs limit the supply of credit to small and medium-sized firms (SMEs). From a sample of 65,535 SME credit proposals submitted to a large Brazilian bank between January 2004 and September 2006, this research analyzes credit granting decisions. Results suggest that small firms face credit rationing and that low risk credit contracts with liquid collateral are their primary source of credit. Also, the bank captures private information through its lending relationships with borrowers, which affects its credit granting decisions. The findings reveal that the bank under study faces difficulties in expanding the supply of credit to small firms mainly because of cost, collateral-dependency and constraints due to asymmetric information.
If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- James H. Rauch & Jill M. Hendrickson, 2004. "Does Bank Consolidation Hurt the Small Business Borrower?," Small Business Economics, Springer, vol. 23(3), pages 219-226, October.
- John Ashton & Kevin Keasey, 2005. "Competition and the Provision of Banking Services to SMEs in the U.K," Small Business Economics, Springer, vol. 24(5), pages 477-485, 06.
- Melanie Feakins, 2004. "Commercial Bank Lending to SMEs in Poland," Small Business Economics, Springer, vol. 23(1), pages 51-70, 08.
- Petersen, Mitchell A & Rajan, Raghuram G, 1995.
"The Effect of Credit Market Competition on Lending Relationships,"
The Quarterly Journal of Economics,
MIT Press, vol. 110(2), pages 407-43, May.
- Mitchell A. Petersen & Raghuram G. Rajan, 1994. "The Effect of Credit Market Competition on Lending Relationships," NBER Working Papers 4921, National Bureau of Economic Research, Inc.
- Timo Baas & Mechthild Schrooten, 2006.
"‘Relationship Banking and SMEs: A Theoretical Analysis’,"
Small Business Economics,
Springer, vol. 27(2), pages 127-137, October.
- Baas, Timo & Schrooten, Mechthild, 2005. "Relationship banking and SMEs: a theoretical analysis," Discussion Paper Series a470, Institute of Economic Research, Hitotsubashi University.
- Timo Baas & Mechthild Schrooten, 2005. "Relationship Banking and SMEs: A Theoretical Analysis," Discussion Papers of DIW Berlin 469, DIW Berlin, German Institute for Economic Research.
- Ari Hyytinen & Lotta Väänänen, 2006. "Where Do Financial Constraints Originate from? An Empirical Analysis of Adverse Selection and Moral Hazard in Capital Markets," Small Business Economics, Springer, vol. 27(4), pages 323-348, December.
- Bester,Helmut Hellwig,Martin, 1987. "Moral hazard and equilibrium credit rationing: An overview of the issues," Discussion Paper Serie A 125, University of Bonn, Germany.
- Ginés Hernández-Cánovas & Pedro Martínez-Solano, 2007. "Effect of the Number of Banking Relationships on Credit Availability: Evidence from Panel Data of Spanish Small Firms," Small Business Economics, Springer, vol. 28(1), pages 37-53, January.
- Diamond, Douglas W, 1989.
"Reputation Acquisition in Debt Markets,"
Journal of Political Economy,
University of Chicago Press, vol. 97(4), pages 828-62, August.
- Benjamin S. Wilner, 2000. "The Exploitation of Relationships in Financial Distress: The Case of Trade Credit," Journal of Finance, American Finance Association, vol. 55(1), pages 153-178, 02.
- Jaffee, Dwight M & Russell, Thomas, 1976. "Imperfect Information, Uncertainty, and Credit Rationing," The Quarterly Journal of Economics, MIT Press, vol. 90(4), pages 651-66, November.
- John Hutchinson & Ana Xavier, 2004.
"Comparing the Impact of Credit Constraints on the Growth of SMEs in a Transition Country with an Established Market Economy,"
LICOS Discussion Papers
15004, LICOS - Centre for Institutions and Economic Performance, KU Leuven.
- John Hutchinson & Ana Xavier, 2006. "Comparing the Impact of Credit Constraints on the Growth of SMEs in a Transition Country with an Established Market Economy," Small Business Economics, Springer, vol. 27(2), pages 169-179, October.
- Valentina Hartarska & Claudio Gonzalez-Vega, 2006. "What Affects New and Established Firms’ Expansion? Evidence from Small Firms in Russia," Small Business Economics, Springer, vol. 27(2), pages 195-206, October.
- Besanko, David & Thakor, Anjan V, 1987. "Collateral and Rationing: Sorting Equilibria in Monopolistic and Competitive Credit Markets," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 28(3), pages 671-89, October.
- Strahan, Philip E. & Weston, James P., 1998. "Small business lending and the changing structure of the banking industry1," Journal of Banking & Finance, Elsevier, vol. 22(6-8), pages 821-845, August.
- Enrica Detragiache & Paolo Garella & Luigi Guiso, 2000. "Multiple versus Single Banking Relationships: Theory and Evidence," Journal of Finance, American Finance Association, vol. 55(3), pages 1133-1161, 06.
- Berger, Allen N & Udell, Gregory F, 1995. "Relationship Lending and Lines of Credit in Small Firm Finance," The Journal of Business, University of Chicago Press, vol. 68(3), pages 351-81, July.
- Stiglitz, Joseph E & Weiss, Andrew, 1981. "Credit Rationing in Markets with Imperfect Information," American Economic Review, American Economic Association, vol. 71(3), pages 393-410, June.
When requesting a correction, please mention this item's handle: RePEc:eee:jbrese:v:64:y:2011:i:3:p:309-315. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Zhang, Lei)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.