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Bank Size and Small- and Medium-sized Enterprise (SME) Lending: Evidence from China

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  • Shen, Yan
  • Shen, Minggao
  • Xu, Zhong
  • Bai, Ying

Abstract

Summary Using panel data collected in 2005, we evaluate how bank size, discretion over credit, incentive schemes, competition, and the institutional environment affect lending to small- and medium-sized enterprises in China. We deal with the endogeneity problem using instrumental variables, and a reduced-form approach is also applied to allow for weak instruments in estimation. We find that total bank asset is an insignificant factor for banks' decision on small- and medium-enterprise (SME) lending, but more local lending authority, more competition, carefully designed incentive schemes, and stronger law enforcement encourage commercial banks to lend to SMEs.

Suggested Citation

  • Shen, Yan & Shen, Minggao & Xu, Zhong & Bai, Ying, 2009. "Bank Size and Small- and Medium-sized Enterprise (SME) Lending: Evidence from China," World Development, Elsevier, vol. 37(4), pages 800-811, April.
    • Handle: RePEc:eee:wdevel:v:37:y:2009:i:4:p:800-811
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