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Credit Rationing in European SMEs and their Lending Infrastructure

Author

Listed:
  • Andrea Mc Namara

    (National University of Ireland)

  • Pierluigi Murro

    (LUISS University Author-Name: Sheila O'Donohoe
    Waterford Institute of Technology)

Abstract
We examine the influence of countries lending infrastructure on credit rationing for European SMEs. This lending infrastructure is comprised of countries information, legal, judicial, bankruptcy, social and regulatory environments. Using a sample of 13,957 SMEs from eleven European countries, we find that SMEs in countries in which there is greater information sharing, fewer legal rights, a more efficient judicial system and less efficient bankruptcy system are less likely to be credit rationed. Moreover, an efficient bankruptcy regime is more important for larger and more risky firms in reducing the likehood of they being credit rationed. Equally the impact of banks regulatory regime varies across firm riskiness; a stricter regime results in a greater likehood of credit rationing for more risky or finally weaker firms in contrast to stronger firms where less regulation sees more rationing.

Suggested Citation

  • Andrea Mc Namara & Pierluigi Murro, 2018. "Credit Rationing in European SMEs and their Lending Infrastructure," Working Papers CASMEF 1803, Dipartimento di Economia e Finanza, LUISS Guido Carli.
    • Handle: RePEc:lui:casmef:1803
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    File URL: http://economiaefinanza.luiss.it/sites/economiaefinanza.luiss.it/files/1803_0.pdf
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    References listed on IDEAS

    as
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    2. Baum, Christopher F. & Schäfer, Dorothea & Talavera, Oleksandr, 2011. "The impact of the financial system's structure on firms' financial constraints," Journal of International Money and Finance, Elsevier, vol. 30(4), pages 678-691, June.
    3. John Armour & Simon Deakin & Prabirjit Sarkar & Mathias Siems & Ajit Singh, 2009. "Shareholder Protection and Stock Market Development: An Empirical Test of the Legal Origins Hypothesis," Journal of Empirical Legal Studies, John Wiley & Sons, vol. 6(2), pages 343-380, June.
    4. Thorsten Beck & Asli Demirgüç‐Kunt & Vojislav Maksimovic, 2005. "Financial and Legal Constraints to Growth: Does Firm Size Matter?," Journal of Finance, American Finance Association, vol. 60(1), pages 137-177, February.
    5. Alves, Paulo F. Pereira & Ferreira, Miguel A., 2011. "Capital structure and law around the world," Journal of Multinational Financial Management, Elsevier, vol. 21(3), pages 119-150, July.
    6. Beck, Thorsten & Demirguc-Kunt, Asli, 2006. "Small and medium-size enterprises: Access to finance as a growth constraint," Journal of Banking & Finance, Elsevier, vol. 30(11), pages 2931-2943, November.
    7. Beck, Thorsten & Demirgüç-Kunt, Asli & Maksimovic, Vojislav, 2008. "Financing patterns around the world: Are small firms different?," Journal of Financial Economics, Elsevier, vol. 89(3), pages 467-487, September.
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    Cited by:

    1. Alves, Paulo F. Pereira & Ferreira, Miguel A., 2011. "Capital structure and law around the world," Journal of Multinational Financial Management, Elsevier, vol. 21(3), pages 119-150, July.

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    More about this item

    Keywords

    SMEs; Lending Infrastracture; Credit Constraints.;
    All these keywords.

    JEL classification:

    • G20 - Financial Economics - - Financial Institutions and Services - - - General
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation

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