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Journal of Financial Services Research

Erschienen in:

01.12.2009

Bank Market Structure, Competition, and SME Financing Relationships in European Regions

verfasst von: Steve Mercieca, Klaus Schaeck, Simon Wolfe

Erschienen in: Journal of Financial Services Research | Ausgabe 2-3/2009

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Abstract

How do concentration and competition in the European banking sector affect lending relationships between small and medium sized enterprises (SMEs) and their banks? Recent empirical evidence suggests that concentration and competition capture different characteristics of banking systems. Using a unique dataset on SMEs for selected European regions, we empirically investigate the impact of increasing concentration and competition on the number of lending relationships maintained by SMEs. We find that competition has a positive effect on the number of lending relationships, weak evidence that concentration reduces the number of banking relationships and weak persistent evidence that they tend to offset each other.

Vorheriger Artikel Discussion of “Bank Mergers and the Dynamics of Deposit Rates”

Nächster Artikel Comments on Bank Market Structure, Competition, and SME Financing Relationships in European Regions By Mercieca, Schaeck, and Wolfe

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The EU defines SMEs as enterprises that employ fewer than 250 people, have an annual turnover not exceeding €50 million, and/or annual balance sheet total not exceeding €43 million.

Observatory for European SMEs, Enterprise Directorate-General of the European Commission, (2004), Brussels.

Such developments have been extensively studied for the US, see, for instance, Berger and Udell (2002).

Further details regarding composition of these regions are provided in Martin et al. (2001).

The questionnaire is available from the authors on request.

We present definitions for the explanatory variables in Appendix I.

The definition of a banking market is likely to affect inferences regarding competition, when competition is inferred from concentration ratios. This is due to the fact that banking markets in small countries are likely to extend beyond a single nation’s borders and because large banks operate globally.

The full set of results including all control variables can be obtained from the authors upon request.

To investigate the large size of our coefficients in Panel A we re-ran our analysis with outliers for Germany and the UK removed. For a German sample of 39 and UK sample of 101 firms we obtain more normal sized coefficients and still obtain highly significant and same sign coefficients as reported here. Available on request from the authors.

We thank the editor and an anonymous referee for pointing this out.

Therefore, the magnitude of the H-Statistic can serve as a measure for the degree of competition, assuming that the bank faces a demand with constant elasticity and a Cobb-Douglas production technology (Vesala, 1995).

We are particularly indebted to Anna Bullock, Survey and Database Manager at the Centre for Business Research, University of Cambridge for providing us with this data.

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Titel: Bank Market Structure, Competition, and SME Financing Relationships in European Regions
verfasst von: Steve Mercieca
Klaus Schaeck
Simon Wolfe
Publikationsdatum: 01.12.2009
Verlag: Springer US
Erschienen in: Journal of Financial Services Research / Ausgabe 2-3/2009
Print ISSN: 0920-8550
Elektronische ISSN: 1573-0735
DOI: https://doi.org/10.1007/s10693-009-0060-0

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