Bank Market Structure, Competition, and SME Financing Relationships in European Regions

26 Pages Posted: 24 Apr 2009 Last revised: 30 Mar 2010

See all articles by Steve Mercieca

Steve Mercieca

University of Southampton

Klaus Schaeck

University of Bristol

Simon Wolfe

University of Southampton - School of Management; University of Southampton - Southampton Business School

Date Written: April 1, 2009

Abstract

How do concentration and competition in the European banking sector affect lending relationships between small and medium sized enterprises (SMEs) and their banks? Recent empirical evidence suggests that concentration and competition capture different characteristics of banking systems. Using a unique data set on SMEs for selected European regions, we empirically investigate the impact of increasing concentration and competition on the number of lending relationships maintained by SMEs. We find that competition has a positive effect on the number of lending relationships, weak evidence that concentration reduces the number of banking relationships and weak persistent evidence that they tend to offset each other.

Keywords: SME financing, relationship banking, bank market structure

JEL Classification: G20, G21, G28

Suggested Citation

Mercieca, Steve and Schaeck, Klaus and Wolfe, Simon, Bank Market Structure, Competition, and SME Financing Relationships in European Regions (April 1, 2009). Journal of Financial Services Research, Vol. 36, pp. 137-155. Available at SSRN: https://ssrn.com/abstract=1393811

Steve Mercieca

University of Southampton ( email )

Highfield
Southampton
Hampshire, SO 17 1BJ
United Kingdom

Klaus Schaeck

University of Bristol ( email )

University of Bristol,
Senate House, Tyndall Avenue
Bristol, BS8 ITH
United Kingdom

Simon Wolfe (Contact Author)

University of Southampton - School of Management ( email )

Highfield
Southampton S017 1BJ, Hampshire SO17 1BJ
United Kingdom

University of Southampton - Southampton Business School ( email )

Southampton, SO17 1BJ
United Kingdom

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