Banking Market Structure, Institutions, and SMEs’ Access to Finance in Transition Economies: The Case of Ukraine

48 Pages Posted: 16 Oct 2010

See all articles by Muzaffar Olimjonovich Ahunov

Muzaffar Olimjonovich Ahunov

Endicott College, Woosong University

Leo Van Hove

Vrije Universiteit Brussel (VUB)

Marc Jegers

Free University of Brussels (VUB) - Micro-Economics for Profit and Non Profit Sector (MICE)

Date Written: October 15, 2010

Abstract

We investigate the impact of local banking market concentration on small and medium-sized enterprises’ access to finance in Ukraine, as an under-researched case of a country where crime and corruption rates are high. We combine firm-level observations from the EBRD’s BEEPS survey with unique, self-collected data on local banking markets. We take into account the specific context of a transition economy by introducing measures of institutional weakness. Our results show a non-monotonic relationship between banking market concentration and access to finance. Across all firms, some banking market power proves to increase access to finance, but too much concentration has an adverse effect. This is consistent with the theories that stress the importance of asymmetric information. However, for SMEs with higher perceptions of institutional weakness, we find that access to finance improves at both the lowest and highest levels of banking market concentration. We conjecture that such a dual impact might be typical for transition economies.

Keywords: Bank Concentration, Institutions, Access to Finance, SMEs, Transition Economies

JEL Classification: G21, G28, L11, L14, K40

Suggested Citation

Ahunov, Muzaffar Olimjonovich and Van Hove, Leo and Jegers, Marc, Banking Market Structure, Institutions, and SMEs’ Access to Finance in Transition Economies: The Case of Ukraine (October 15, 2010). Available at SSRN: https://ssrn.com/abstract=1692734 or http://dx.doi.org/10.2139/ssrn.1692734

Muzaffar Olimjonovich Ahunov (Contact Author)

Endicott College, Woosong University ( email )

27 Baengnyong-ro 57beon-gil
Jayang-dong, Daejeon
Korea, Republic of (South Korea)

Leo Van Hove

Vrije Universiteit Brussel (VUB) ( email )

Department of Applied Economics (APEC)
Pleinlaan 5
Brussels, B-1050
Belgium
+32 2 614 84 49 (Phone)

HOME PAGE: http://research.vub.ac.be/applied-economics/members

Marc Jegers

Free University of Brussels (VUB) - Micro-Economics for Profit and Non Profit Sector (MICE) ( email )

Brussels
Belgium
+32-2-629 21 13 (Phone)
+32-2-629 22 82 (Fax)

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