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Financial fragmentation and SMEs’ access to finance

Calabrese, Raffaella and Girardone, Claudia and Sclip, Alex (2021) 'Financial fragmentation and SMEs’ access to finance.' Small Business Economics, 57 (4). pp. 2041-2065. ISSN 0921-898X (In Press)

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This paper focuses on the impact of financial fragmentation on small and medium enterprises (SMEs)’ access to finance. We combine country-level data on financial fragmentation and the ECB’s SAFE (Survey on the Access to Finance of Enterprises) data for 12 European Union (EU) countries over 2009-2016. Our findings indicate that an increase in financial fragmentation not only raises the probability of all firms to be rationed but also to be charged higher loan rates; in addition, it increases the likelihood of borrower discouragement and it impairs firms’ perceptions of the future availability of bank funds. Less creditworthy firms are even more likely to become credit rationed, suggesting a flight to quality effect in lending. However, our study also documents a potential adverse effect of increasing bank market power resulting from greater integration. This suggests that financial integration could impair firms’ financing, if not accompanied by policy initiatives aimed at maintaining an optimal level of competition in the banking sector.

Item Type: Article
Uncontrolled Keywords: Financial fragmentation; Bank Financing; Credit Access; SMEs
Divisions: Faculty of Social Sciences
Faculty of Social Sciences > Essex Business School
SWORD Depositor: Elements
Depositing User: Elements
Date Deposited: 20 Jul 2020 08:11
Last Modified: 18 Aug 2022 12:33

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