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Small firms and bank relationships: a study of cultural differences between English and Scottish banks


  • Clay, N.
  • Cowling, M.


Small firms are reliant upon high street banks for the vast majority of their external borrowing. However, despite the dramatic increase in numbers of small firms over the 1980s, and the subsequent rise in bank lending to this sector, the relationship has been far from ideal. This paper investigates whether Scottish and English banks have different lending cultures. In doing so we provide some empirical evidence in support of the findings of Stiglitz and Weiss, that adjusting interest rate margins and/or collateral ratios did not reduce the problem of adverse selection. We tentatively conclude that Scottish banks appear to be more responsive, knowledgeable and sympathetic towards their small firm customers than English banks.

Suggested Citation

  • Clay, N. & Cowling, M., 1996. "Small firms and bank relationships: a study of cultural differences between English and Scottish banks," Omega, Elsevier, vol. 24(1), pages 115-120, February.
  • Handle: RePEc:eee:jomega:v:24:y:1996:i:1:p:115-120

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    References listed on IDEAS

    1. Cowling, Marc & Clay, Nick, 1995. "Factors Influencing Take-Up Rates on the Loan Guarantee Scheme," Small Business Economics, Springer, vol. 7(2), pages 141-152, April.
    2. 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.
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