Lending to Small and Medium-Sized Firms: Is There an East-West Gap in Germany?

Lehmann, Erik E.; Neuberger, Doris; Räthke, Solvig

Download This Paper

Open PDF in Browser

Add Paper to My Library

Lending to Small and Medium-Sized Firms: Is There an East-West Gap in Germany?

18 Pages Posted: 15 Jun 2004

See all articles by Erik E. Lehmann

Erik E. Lehmann

University of Augsburg - Faculty of Business and Economics

Doris Neuberger

University of Rostock - Department of Economics

Solvig Räthke

University of Rostock

There are 2 versions of this paper

Abstract

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.

Keywords: Bank lending, small and medium-sized firms, credit risks, collateral, German reunification

JEL Classification: G21, 016, R1

Suggested Citation: Suggested Citation

Lehmann, Erik E. and Neuberger, Doris and Raethke, Solvig, Lending to Small and Medium-Sized Firms: Is There an East-West Gap in Germany?. Available at SSRN: https://ssrn.com/abstract=556347