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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).
Financial theory creates a puzzle. Some authors argue that high-risk entrepreneurs choose debt contracts instead of equity contracts since risky but high returns are of relatively more value for a loan-financed firm. On the contrary, authors who focus explicitly on start-up finance predict that entrepreneurs are the more likely to seek equity-like venture capital contracts, the more risky their projects are. Our paper makes a first step to resolve this puzzle empirically. We present microeconometric evidence on the determinants of debt and equity financing in young and innovative SMEs. We pay special attention to the role of risk for the choice of the financing method. Since risk is not directly observable we use different indicators for financial and project risk. It turns out that our data generally confirms the hypothesis that the probability that a young high-tech firm receives equity financing is an increasing function of the financial risk. With regard to the intrinsic project risk, our results are less conclusive, as some of our indicators of a risky project are found to have a negative effect on the likelihood to be financed by private equity.
The paper is a follow-up to an article published in Technique Financière et Developpement in 2000 (see the appendix to the hardcopy version), which portrayed the first results of a new strategy in the field of development finance implemented in South-East Europe. This strategy consists in creating microfinance banks as greenfield investments, that is, of building up new banks which specialise in providing credit and other financial services to micro and small enterprises, instead of transforming existing credit-granting NGOs into formal banks, which had been the dominant approach in the 1990s. The present paper shows that this strategy has, in the course of the last five years, led to the emergence of a network of microfinance banks operating in several parts of the world. After discussing why financial sector development is a crucial determinant of general social and economic development and contrasting the new strategy to former approaches in the area of development finance, the paper provides information about the shareholder composition and the investment portfolio of what is at present the world's largest and most successful network of microfinance banks. This network is a good example of a well-functioning "private public partnership". The paper then provides performance figures and discusses why the creation of such a network seems to be a particularly promising approach to the creation of financially self-sustaining financial institutions with a clear developmental objective.
The paper is a follow-up to an article published in Technique Financière et Developpement in 2000 (see the appendix to the hardcopy version), which portrayed the first results of a new strategy in the field of development finance implemented in South-East Europe. This strategy consists in creating microfinance banks as greenfield investments, that is, of building up new banks which specialise in providing credit and other financial services to micro and small enterprises, instead of transforming existing credit-granting NGOs into formal banks, which had been the dominant approach in the 1990s. The present paper shows that this strategy has, in the course of the last five years, led to the emergence of a network of microfinance banks operating in several parts of the world. After discussing why financial sector development is a crucial determinant of general social and economic development and contrasting the new strategy to former approaches in the area of development finance, the paper provides information about the shareholder composition and the investment portfolio of what is at present the world's largest and most successful network of microfinance banks. This network is a good example of a well-functioning "private public partnership". The paper then provides performance figures and discusses why the creation of such a network seems to be a particularly promising approach to the creation of financially self-sustaining financial institutions with a clear developmental objective.
National borders in Europe have been opening since 1992 and the Union is expanding to embrace more countries prompting enterprises to consider alternative and more attractive locations outside their home country to handle part of their activities (Van Dijk and Pellenbarg, 2000; Cantwell and Iammarino, 2002). International relocation is becoming more and more popular even for small and medium-sized firms that are involved in a growing internationalisation process, mirroring the path of multinational enterprises. Italy, like other industrialised countries, is experiencing a fragmentation of the production chain: firms tend to shift high labour-intensive manufacturing activities to areas characterised by an abundance of low-cost labour (i.e. Central Eastern Europe, India, South East Asia, Latin America, Russia and Central Asia). The internationalisation process by Italian district SMEs has assumed significant dimensions. It has become a relevant topic in recent economic debate because of its consequences for the local context and, in particular, the implication for the survival of the Italian district model (see, among others, Becattini, 2002; Rullani, 1998 and Cor, 2000). The purpose of the paper is twofold: it aims at (i) identifying the managerial approaches to the internationalisation process adopted by the Italian district SMEs and by the Industrial District (ID) itself and (ii) at investigating whether the international delocalisation to the South Eastern European countries (SEECs) constitutes a threat or an opportunity for the Italian district model. The paper is organised as follows. The general introduction is followed by a description of the evolution of the internationalisation processes in Italy over the last three decades. Section three presents a discussion of the internationalisation strategies adopted by Italian SMEs. Section four focuses on the internationalisation process of the Italian industrial districts SMEs. A review of the studies on the subject is offered in section five. Section six presents a qualitative study on the internationalisation process as undergone by sports shoes manufacturers in the Montebelluna district, in north-east Italy. This study shows different managerial strategies to the internationalisation process and emphasises that the motivations can evolve over time, from originally cost-saving to increasingly market-oriented or global strategies. On the basis of a literature review, section seven investigates whether internationalisation constitutes a threat (i.e. loss of jobs and knowledge) or an opportunity (i.e. enlargement of the ID, update district s competitiveness) for the district model. Finally, some summarising remarks in section eight conclude the paper.
This paper analyzes loan pricing when there is multiple banking and borrower distress. Using a unique data set on SME lending collected from major German banks, we can instrument for effective coordination between lenders, carrying out a panel estimation. The analysis allows to distinguish between rents that accrue due to single bank lending, rents that accrue due to relationship lending, and rents that accrue due to the elimination of competition among multiple lenders. We find the relationship lending to have no discernible impact on loan spreads, while both single lending and coordinated multiple lending significantly increase the spread. Thus, contrary to predictions in the literature, multiple lending does not insure the borrower against hold-up. JEL Classification: D74, G21, G33, G34
Small and medium-sized firms typically obtain capital via bank financing. They often rely on a mixture of relationship and arm’s-length banking. This paper explores the reasons for the dominance of heterogeneous multiple banking systems. We show that the incidence of inefficient credit termination and subsequent firm liquidation is contingent on the borrower’s quality and on the relationship bank’s information precision. Generally, heterogeneous multiple banking leads to fewer inefficient credit decisions than monopoly relationship lending or homogeneous multiple banking, provided that the relationship bank’s fraction of total firm debt is not too large.
Despite the relevance of credit financing for the profit and risk situation of commercial banks only little empirical evidence on the initial credit decision and monitoring process exists due to the lack of appropriate data on bank debt financing. The present paper provides a systematic overview of a data set generated during the Center for Financial Studies research project on "Credit Management" which was designed to fill this empirical void. The data set contains a broad list of variables taken from the credit files of five major German banks. It is a random sample drawn from all customers which have engaged in some form of borrowing from the banks in question between January 1992 and January 1997 and which meet a number of selection criteria. The sampling design and data collection procedure are discussed in detail. Additionally, the project's research agenda is described and some general descriptive statistics of the firms in our sample are provided.