Lending to Small and Medium-Sized Firms: Is There an East-West Gap in Germany?
Erik E. Lehmann
University of Augsburg - Faculty of Business and Economics
affiliation not provided to SSRN
University of Rostock - Department of Economics
University of Illinois at Urbana-Champaign's Academy for Entrepreneurial Leadership Historical Research Reference in Entrepreneurship
The financing of small and medium-sized firms is important for the catching-up of the East German to the West German economy since reunification. We explore whether it is restricted by unfavorable bank loan terms, using bank-survey data on lending decisions to small and medium- sized firms. A comparison of the terms of lending between the former East German and West German states yields a lending gap given by higher loan prices and collateral requirements in East Germany. This gap can be explained by differences in credit risks and lending strategies of banks. (Publication abstract.)
Keywords: Credit risks, Statistical data, Risk assessment, Bank loans, Economic growth, Lending policies, Interest (finance), Regional economies, Credit discrimination, Collateral, Financing
Date posted: November 24, 2009
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