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Who Furls the Umbrella on Rainy Days? The Role of Bank Ownership Type and Bank Size in SME Lending

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  • Chung-Hua Shen
  • Haumin Chu
  • Yu-Chun Wang

Abstract

Using Taiwanese bank-level loan data, this paper examines the changes during the three recent recessions in the granting of loans to small and medium-size enterprises (SMEs) by privately owned banks (POBs), government-owned banks (GOBs), and foreign-owned banks (FOBs). The effects of bank size on SME lending are also examined. The behavior of cutting lending during the recession is referred to as "furling the umbrella on rainy days." The behavior is found for FOBs during the last recession (covering the subprime crisis) but not for GOBs and POBs. On the contrary, GOBs even significantly increased SME lending during the crisis period. Finally, large banks make more SME loans than do small banks in both tranquil and crisis times in this study.

Suggested Citation

  • Chung-Hua Shen & Haumin Chu & Yu-Chun Wang, 2012. "Who Furls the Umbrella on Rainy Days? The Role of Bank Ownership Type and Bank Size in SME Lending," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 48(0), pages 184-199, July.
  • Handle: RePEc:mes:emfitr:v:48:y:2012:i:0:p:184-199
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