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Neither a Borrower Nor a Lender Be! Loan Application and Credit Decision for Young European Firms

In: Access to Bank Credit and SME Financing

Author

Listed:
  • Andrea Moro

    (Cranfield University)

  • Daniela Maresch

    (Johannes Kepler University Linz)

  • Annalisa Ferrando

    (European Central Bank)

  • Julia Barbar

    (Cranfield University)

Abstract

We investigate the impact of banks’ capability to recover a loan on firms’ propensity to apply for credit and on banks’ propensity to lend, looking at firms from eleven European countries. Our findings suggest that banks’ recovery rates negatively affect firms’ decisions to apply for credit but not banks’ decision to provide credit. We also find that the role of recovery rates differs in economically weak and strong contexts: high recovery rates discourage borrowers only in economically strong countries and have a positive impact on banks’ lending decisions in economically weak countries.

Suggested Citation

  • Andrea Moro & Daniela Maresch & Annalisa Ferrando & Julia Barbar, 2017. "Neither a Borrower Nor a Lender Be! Loan Application and Credit Decision for Young European Firms," Palgrave Macmillan Studies in Banking and Financial Institutions, in: Stefania Rossi (ed.), Access to Bank Credit and SME Financing, chapter 2, pages 29-58, Palgrave Macmillan.
    • Handle: RePEc:pal:pmschp:978-3-319-41363-1_2
    DOI: 10.1007/978-3-319-41363-1_2
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