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Reduced cross-border lending and financing costs of SMEs

Bremus, Franziska and Neugebauer, Katja (2018) Reduced cross-border lending and financing costs of SMEs. Journal of International Money and Finance, 80. pp. 35-58. ISSN 0261-5606

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Identification Number: 10.1016/j.jimonfin.2017.09.006

Abstract

This paper investigates how the withdrawal of banks from their cross-border business impacted the borrowing costs of European firms since the crisis. We combine aggregate information on total and cross-border credit with firm-level survey data for the period 2010 - 2014. We find that the decline in cross-border lending led to a deterioration in the borrowing conditions of small firms. In countries with more pronounced reductions in cross-border credit inflows, the likelihood of a rise in firms’ external financing costs increased. This result is mainly driven by the interbank channel, which plays a crucial role in transmitting shocks to the real sector across borders.

Item Type: Article
Official URL: https://www.journals.elsevier.com/journal-of-inter...
Additional Information: © 2017 The Authors © CC BY 4.0
Subjects: J Political Science > JZ International relations
JEL classification: F - International Economics > F3 - International Finance > F34 - International Lending and Debt Problems
F - International Economics > F3 - International Finance > F36 - Financial Aspects of Economic Integration
G - Financial Economics > G1 - General Financial Markets > G15 - International Financial Markets
G - Financial Economics > G2 - Financial Institutions and Services > G21 - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
Sets: Research centres and groups > Systemic Risk Centre
Collections > Economists Online
Date Deposited: 26 Sep 2017 12:51
Last Modified: 13 Nov 2017 10:47
Projects: ES/K002309/1
Funders: Economic and Social Research Council
URI: http://eprints.lse.ac.uk/id/eprint/84298

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