ENP Newswire -
Release date- 27022014 -
This study uses firm and bank balance sheet data from across
The bank market power (BMP) hypothesis that higher market power in bank lending leads to lower quantities and higher prices for borrowers, and
The information hypothesis (IH) that when banks have greater market power, they will make greater investments in their relationships with SME borrowers, which will lead to greater credit availability.
The key findings of the research are:
The impact of bank market power on lower firm investment is driven by the adverse effect of bank market power on SME financing constraints.
The heterogeneous effect of bank market power on financing constraints is strongest among 'micro' enterprises.
In countries where the private sector is more reliant on banks for funding, the effect of bank market power on SME financing constraints and investment is exacerbated.
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