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Bank loan terms and conditions for Eurozone SMEs

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  • Konstantinos Drakos

Abstract

The evolution of bank loan price and non-price terms and conditions (T&Cs) for the 2009–2011 period are investigated using firm-level survey data for a sample of Eurozone small and medium-sized enterprises. The raw firm responses, which are of a discrete nature denoting tightening or easing of the T&Cs, or no change at all, are modeled by a bivariate ordered probit model. According to the results obtained, there are sizeable differences between countries, with the protagonists of the sovereign debt crisis (Greece, Ireland, Portugal, Spain) exhibiting predicted probabilities of tightening that are considerably above the Eurozone average. In addition, price T&Cs exhibit a substantial tightening over time. Finally, firms’ net interest expenses and profitability emerge as important determinants in explaining the cross-sectional variation in bank loan T&Cs that they face. Copyright Springer Science+Business Media New York 2013

Suggested Citation

  • Konstantinos Drakos, 2013. "Bank loan terms and conditions for Eurozone SMEs," Small Business Economics, Springer, vol. 41(3), pages 717-732, October.
    • Handle: RePEc:kap:sbusec:v:41:y:2013:i:3:p:717-732
    DOI: 10.1007/s11187-012-9454-8
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    1. Demoussis, Michael & Drakos, Konstantinos & Giannakopoulos, Nicholas, 2016. "The Impact of Sovereign Ratings on Eurozone SMEs Credit Rationing," MPRA Paper 76364, University Library of Munich, Germany.
    2. Michael Demoussis & Konstantinos Drakos & Nicholas Giannakopoulos, 2017. "The impact of sovereign ratings on euro zone SMEs’ credit rationing," Journal of Economic Studies, Emerald Group Publishing Limited, vol. 44(5), pages 745-764, October.
    3. Anagnostopoulou, Seraina C. & Drakos, Konstantinos, 2016. "Bank loan terms and conditions: Is there a macro effect?," Research in International Business and Finance, Elsevier, vol. 37(C), pages 269-282.
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    5. McGuinness, Gerard & Hogan, Teresa & Powell, Ronan, 2018. "European trade credit use and SME survival," Journal of Corporate Finance, Elsevier, vol. 49(C), pages 81-103.
    6. Amarjit Gill & Craig Wilson, 2021. "Bank connections and small business performance: Evidence from Canadian survey data," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 26(4), pages 5110-5134, October.

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    More about this item

    Keywords

    Bank loan; Bivariate ordered probit; Terms and conditions; Small and medium enterprises; C25; G21; L26;
    All these keywords.

    JEL classification:

    • C25 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Discrete Regression and Qualitative Choice Models; Discrete Regressors; Proportions; Probabilities
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • L26 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Entrepreneurship

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