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Small Business Economics

, Volume 39, Issue 2, pp 401–417

First Online: 19 January 2011Accepted: 10 December 2010

Abstract

Small- and medium-sized enterprises SMEs are informationally opaque and bank dependent. In SME lending, banks largely rely on soft information, because the scale and scope of hard information are limited. We analyze whether and how hard and soft information affects the borrower’s bargaining power vis-à-vis its bank. We use the fact that, for a given credit rating, certain borrowers obtain better loan terms than others to define measures of relative bargaining power. Using SME loan data from the USA and Germany, we find that more favorable soft information management skills and character increases borrower bargaining power. We also show that more favorable soft than hard information improves borrower bargaining power. The results are not driven by manipulation or statistical limitations of the credit ratings. Our study suggests that soft information represents an important and direct determinant of borrower bargaining power, affecting the outcomes of the loan contracting process.

KeywordsSME lending Bargaining power Hard and soft information Credit ratings Loan terms JEL ClassificationsG21 L11 M13  Download fulltext PDF



Autor: Jens Grunert - Lars Norden

Fuente: https://link.springer.com/



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