The importance of being unimportant: small firms and small banks in Italy (original) (raw)
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SSRN Electronic Journal, 2006
We thank Mario Anolli, Laura Nieri and Paola Tornaghi for their helpful comments. The authors are solely responsible for the contents of the paper. A special thank goes to Olivier De Jonghe for his valuable comments as discussant and to participants of the European Banking Symposium at Bocconi University (Milan, 5 th and 6 th
The changing structure of local credit markets: Are small businesses special?
Journal of Banking & Finance, 2001
In many countries consolidation in the banking industry has reduced the number of small banks and led to signi®cant shifts in market shares; deregulation has fostered entry in local credit markets and the expansion of branch networks, increasing competition in local markets. Small businesses are believed to be more vulnerable to these changes, since they are more dependent on credit from local banks. In this paper we investigate the consequences of consolidation and entry for these borrowers compared with those for large ®rms. We employ a data set for Italy, which provides information on volumes of loans and bad loans by size of borrower with a detailed geographical partition. We ®nd that mergers are followed by a temporary reduction in outstanding credit to all sizes of borrowers and by an increase in bad loans, most likely due to the reassessment of banks portfolios. Entry has a relatively persistent negative impact on credit supply to small and medium-sized ®rms. Our results also show that concentration, branch density and the share of branches of small banks aect the volumes of credit and bad loans of small borrowers. Ó
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SME Financing and the Choice of Lending Technology in Italy: Complementarity or Substitutability?
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Banking structure and regional economic growth: lessons from Italy
The Annals of Regional Science, 2005
Following the literature on the comparative advantage of small versus large banks at lending to small businesses, and in light of the worldwide decline in the number of intermediaries that specialize in this type of lending associated with deregulation in the banking industry, we examine the role that specific categories of banks have played in the context of Italy's regional economic growth. Over the estimation period, 1970-1993, which ends in the year of full implementation of the banking reform that introduced statutory de-specialization and branching liberalization, Italy featured not only a substantial presence of SME's in the real sector, as is still the case, but also a large and heterogeneous set of credit institutions with different ownership, size and lending styles. Exploiting these peculiarities we study the role of specific intermediaries and gather indirect evidence concerning the likely effects, ceteris paribus, of the current consolidation processes. The main findings, stemming from panel regressions with fixed effects, are as follows. The overall size of the financial sector has a weak impact on growth, but some intermediaries are better than others: Cooperative banks and Special credit institutions play a positive role, Banks of national interest (basically large private banks) and Public law banks (government-owned banks) either do not affect growth or have a negative influence depending on how growth is measured. Cooperative banks were mostly small banks and Special credit institutions were all but large conglomerates with standardized credit policies, hence our results lend support to the current worldwide concerns of a reduction in the availability of credit to SME's resulting from consolidation and regulatory reforms in the banking industry.
Bank interest rates and credit relationships in Italy
Journal of Banking and Finance, 1999
When evaluating the performance of a ®nancial system in supporting the investment activity of the corporate sector, a distinction is usually drawn between``banking economies'' and``market economies'', the former being characterized by long-term relations between banks and the industrial sector. Although theoretical studies and empirical results seem to agree that lending relationships increase the available quantity of capital to ®rms, they have little to say on the cost of bank credit: it is not clear whether a close relationship with a main bank would allow the borrower to pay a lower interest rate or expose him to a monopolistic rent. Using a unique data-set reporting detailed information on the evolution over time of individual bank±borrower relationships in Italy, we show evidence that a main bank provides credit at a lower cost and that some competition helps to reinforce the commitment between the borrower and the bank.
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SSRN Electronic Journal, 2000
Banking industry consolidation has raised concern about the supply of small business credit since large banks generally invest lower proportions of their assets in small business loans. However, we find that the likelihood that a small business borrows from a bank of a given size is roughly proportional to the local market presence of banks of that size, although there are exceptions. Moreover, small business loan interest rates depend more on the size structure of the market than on the size of the bank providing the credit, with markets dominated by large banks generally charging lower prices. JEL Classification Numbers: G21, G28, G34, L11
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unine.ch
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