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Legal-Institutional Environment, Social Capital and the Cost of Bank Financing for SMEs: Evidence from the Euro Area

In: Access to Bank Credit and SME Financing

Author

Listed:
  • Emma Galli

    (Sapienza University of Rome)

  • Danilo V. Mascia

    (University of Cagliari)

  • Stefania P. S. Rossi

    (University of Cagliari)

Abstract

This chapter addresses the question of whether a country’s legal-institutional and social environment affects the cost of bank financing for SMEs. We employ 22,295 firm-level observations drawn from the ECB SAFE from 2009 to 2013 as a sample of eleven euro area countries. After controlling for firm characteristics and macroeconomic features, we find that a less efficient judicial system as well as a higher degree of concentration of the banking industry increases the cost of funding for SMEs; the latter is instead reduced when the market share of cooperative banks and social capital are higher. Overall, we provide evidence that a better institutional and social environment produces positive externalities in the credit market, thereby favouring the cost of bank financing for SMEs.

Suggested Citation

  • Emma Galli & Danilo V. Mascia & Stefania P. S. Rossi, 2017. "Legal-Institutional Environment, Social Capital and the Cost of Bank Financing for SMEs: Evidence from the Euro Area," Palgrave Macmillan Studies in Banking and Financial Institutions, in: Stefania Rossi (ed.), Access to Bank Credit and SME Financing, chapter 3, pages 59-81, Palgrave Macmillan.
    • Handle: RePEc:pal:pmschp:978-3-319-41363-1_3
    DOI: 10.1007/978-3-319-41363-1_3
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    Cited by:

    1. Emma Galli & Danilo V. Mascia & Stefania P. S. Rossi, 2017. "Small Firms, Corruption, and Demand for Credit. Evidence from the Euro Area," International Business Research, Canadian Center of Science and Education, vol. 10(11), pages 158-174, November.

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