Antitrust & Competition Policy Blog

Editor: D. Daniel Sokol
University of Florida
Levin College of Law

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Monday, March 21, 2011

Does Banking Competition Alleviate or Worsen Credit Constraints Faced by Small and Medium Enterprises? Evidence from China

Posted by D. Daniel Sokol

Terence Tai Leung Chong, Chinese University of Hong Kong (CUHK) - Department of Economics, Liping Lu, Tilburg University - CentER, European Banking Center(EBC), and Steven R. G. Ongena, Tilburg University - CentER, European Banking Center (EBC), ask Does Banking Competition Alleviate or Worsen Credit Constraints Faced by Small and Medium Enterprises? Evidence from China.

ABSTRACT: Banking competition may enhance or hinder the financing of small and medium enterprises (SMEs). Using a survey on the financing of China’s SMEs combined with detailed bank branch information, we investigate how concentration in the local banking market affects the availability of credit. It is found that lower market concentration alleviates financing constraints. The unconcentrated presence of joint stock banks has a larger effect on alleviating credit constraints, while the presence of state-owned banks has a smaller effect, than the presence of city commercial banks.

http://lawprofessors.typepad.com/antitrustprof_blog/2011/03/does-banking-competition-alleviate-or-worsen-credit-constraints-faced-by-small-and-medium-enterprise.html

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