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Lending infrastructure and credit rationing of European SMEs

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  • Andrea Mc Namara
  • Sheila O'Donohoe
  • Pierluigi Murro

Abstract

We examine the influence of countries’ lending infrastructure on credit rationing for European SMEs (small and medium sized enterprises). This lending infrastructure, conceptualised by Berger and Udell [2006] is comprised of a country’s information, legal, judicial, bankruptcy, social and regulatory environment. Using a sample of 13,957 SMEs from eleven European countries, we find that SMEs in countries with more efficient judicial systems, less efficient bankruptcy systems and with greater levels of trust are less likely to be credit rationed. The results are robust for different forms of credit rationing and different measures of lending infrastructure. The paper also shows some variation in the results across different sub-samples, considering firm size, age and riskiness. We also exploit the variation between core and periphery European countries and the peculiarity of the sovereign debt crisis period.

Suggested Citation

  • Andrea Mc Namara & Sheila O'Donohoe & Pierluigi Murro, 2020. "Lending infrastructure and credit rationing of European SMEs," The European Journal of Finance, Taylor & Francis Journals, vol. 26(7-8), pages 728-745, May.
    • Handle: RePEc:taf:eurjfi:v:26:y:2020:i:7-8:p:728-745
    DOI: 10.1080/1351847X.2019.1637357
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    Cited by:

    1. Peruzzi, Valentina & Murro, Pierluigi & Di Colli, Stefano, 2023. "The distributional impact of local banking. Evidence from the financial and sovereign-debt crises," European Journal of Political Economy, Elsevier, vol. 80(C).
    2. Lisana B. Martinez & M. Belén Guercio & Aurelio F. Bariviera, 2022. "A meta‐analysis of SMEs literature based on the survey on access to finance of enterprises of the European central bank," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 27(2), pages 1870-1885, April.
    3. Huang, Qiuping & Zhao, Xiande & Yeung, KwanHo & Ma, Lijun & Yeung, Jeff Hoi-yan, 2021. "Effects of information-processing mechanisms on Internet-based purchase order financing," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 146(C).
    4. Marie Finnegan & Supriya Kapoor, 2023. "ECB unconventional monetary policy and SME access to finance," Small Business Economics, Springer, vol. 61(3), pages 1253-1288, October.
    5. Bertrand, Jérémie & Delanghe, Marieke & Klein, Paul-Olivier, 2023. "Does relationship lending help firms to ask for credit? European cross-country evidence," Economic Modelling, Elsevier, vol. 124(C).
    6. Pankaj C. Patel & Maria João Guedes, 2022. "Do family firms perform better under financial constraints? Financial constraints, family firms and performance," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 43(4), pages 933-949, June.
    7. Désiré Avom & Cherif Abdramane, 2024. "Why are small and medium-sized businesses in Africa turning away from the bank credit market?," SN Business & Economics, Springer, vol. 4(7), pages 1-24, July.

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