The Granting of Loans by German Banks to Small and Medium-Sized Entities Against the Background of International Financial Reporting
29 Pages Posted: 9 Nov 2008 Last revised: 27 Mar 2010
Date Written: November 6, 2008
Due to the lack of capital market orientation, small and medium-sized entities regularly finance themselves by borrowing debt capital in form of credits. Such credits are most commonly provided by institutions of the German universal banking system. Against the background of an increasingly restrictive regulatory environment (especially due to Basel II) and the current discussions about the harmonisation of national (according to the German Commercial Code) and international accounting principles (German Accounting Law Modernization Act - BilMoG, IFRS for SMEs/PEs), it is imperative to review the impact of the internationalisation of financial reporting and of the changing determining factors on lending decisions within Germany. In this context it is especially interesting, both from an economic and from a behavioural perspective, to examine some highly debated theses, which claim that the system of financial reporting employed by the credit-seeker will influence the banks' lending decisions as well as the conditions under which a loan is granted. Though there have been many differing opinions about these theses, no up-to-date empirical data had yet been gathered from the perspective of the credit institutions themselves. This report therefore draws on the present state of research, complementing it for the first time with representative empirical data from the perspective of the decision makers in German credit institutions.
Keywords: Granting of loans, credit rating, rating advantages, credit conditions, IFRS for SMEs, transition to IFRS, standardization of financial statements
JEL Classification: M40, M41
Suggested Citation: Suggested Citation