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Bank market power and SME finance: firm-bank evidence from European countries

Wang, X., Han, L. and Huang, X. (2020) Bank market power and SME finance: firm-bank evidence from European countries. Journal of International Financial Markets, Institutions and Money, 64. 101162. ISSN 1042-4431

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To link to this item DOI: 10.1016/j.intfin.2019.101162

Abstract/Summary

Using unique matched data on SME-bank relationships from 19 European countries, we examine the effects of bank-level market power on SME finance. We show novel evidence that bank market power at disaggregate level reduces SMEs’ access to bank finance and worsens their credit constraints. Whilst, banking market concentration improves credit supply to SMEs. The unfavourable market power effect is stronger for SMEs who are more informationally opaque, riskier and more dependent on external finance. We also show supporting evidence on Information-based Hypothesis where with greater market power, banks are more likely to engage in relationship lending.

Item Type:Article
Refereed:Yes
Divisions:Henley Business School > Business Informatics, Systems and Accounting
ID Code:88097
Uncontrolled Keywords:SME, bank relationship, market power, financing constraint
Publisher:Elsevier

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