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This paper addresses the question whether close borrower-lender relationships, so called hausbank-relationships, facilitate the funding and beneficial development of SME. To this end, we derive a model which relates a firm's growth rate to its need for external funds and subsequently compute the firms that exceed their predicted growth rate. We then use this measure to identify specific characteristics that are associated with long- and short-term financing of firm growth, in particular the influence of relationship lending. We find that close ties with savings banks predict firms' access to external finance to fund growth. Moreover, the long-term liabilities of firms with hausbank-relationships almost double those with multiple relationships while the overall leverage is about the same. In turn, we find an strong empirical relationship between the provision of long-term funds and firm growth. Keywords: small business lending, credit access, public banks JEL Classifications: G21, D21
In this paper, we examine the impact of mergers among German savings banks on the extent to which these savings banks engage in small business lending. The ongoing consolidation in the banking industry has sparked concerns about the continuous availability of credit to small businesses which has been further fueled by empirical studies that partly confirm a reduction in small business lending in the aftermath of mergers. However, using a proprietary data set of German savings banks we find strong evidence that in Germany merging savings banks do not significantly change the extent to which they lend to small businesses compared to prior to the merger or compared to the contemporaneous lending by non-merging banks. We investigate the merger related effects on small business lending in Germany from a bank-level perspective. Furthermore, we estimate small business lending and its continuous adjustment process simultaneously using recent General Method of Moments (GMM) techniques for panel data as proposed by Arellano and Bond (1991).