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SME Financing and the Choice of Lending Technology in Italy: Complementarity or Substitutability?

Author

Listed:
  • Francesca Bartoli

    (UniCredit Group)

  • Giovanni Ferri

    (University of Bari)

  • Pierluigi Murro

    (LUISS Guido Carli University, Department of Economics and Finance and CASMEF)

  • Zeno Rotondi

    (UniCredit Group)

Abstract

This paper investigates SME financing in Italy. The literature distinguishes between two main different lending technologies (LTs) for SMEs: transactional and relationship LTs. We find that banks lend to SMEs by using both LTs together, independently of the size and proximity of borrowers. Moreover, we show that when soft information is taken into account in transactional (relationship) lending it increases (decreases) the probability of firms being credit rationed. These results support the view that LTs can be complementary, but reject the hypothesis that substitutability among LTs is somehow possible for outsiders by means of hardening of soft information.

Suggested Citation

  • Francesca Bartoli & Giovanni Ferri & Pierluigi Murro & Zeno Rotondi, 2012. "SME Financing and the Choice of Lending Technology in Italy: Complementarity or Substitutability?," Working Papers CASMEF 1212, Dipartimento di Economia e Finanza, LUISS Guido Carli.
    • Handle: RePEc:lui:casmef:1212
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    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G30 - Financial Economics - - Corporate Finance and Governance - - - General
    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance

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