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Does Banking Competition Alleviate or Worsen Credit Constraints Faced by Small- and Medium-Sized Enterprises? Evidence from China

European Banking Center Discussion Paper No. 2012-007

51 Pages Posted: 13 Feb 2011 Last revised: 10 Dec 2014

Terence Tai-Leung Chong

The Chinese University of Hong Kong (CUHK) - Lau Chor Tak Institute of Global Economics and Finance

Liping Lu

VU University Amsterdam

Steven Ongena

University of Zurich - Department of Banking and Finance; Swiss Finance Institute

Date Written: April 4, 2013

Abstract

Banking competition may enhance or hinder the financing of small and medium-sized enterprises. Using a survey on the financing of such enterprises in China, combined with detailed bank branch information, we investigate how concentration in local banking market affects the availability of credit. We find that lower market concentration alleviates financing constraints. The widespread presence of joint-stock banks has a larger effect on alleviating these constraints, than the presence of city commercial banks, while the presence of state-owned banks has a smaller effect.

Keywords: Banking Competition, SMEs Financing, Credit Constraints

JEL Classification: D41, D43, G21

Suggested Citation

Chong, Terence Tai-Leung and Lu, Liping and Ongena, Steven, Does Banking Competition Alleviate or Worsen Credit Constraints Faced by Small- and Medium-Sized Enterprises? Evidence from China (April 4, 2013). European Banking Center Discussion Paper No. 2012-007. Available at SSRN: https://ssrn.com/abstract=1759864 or http://dx.doi.org/10.2139/ssrn.1759864

Terence Tai-Leung Chong

The Chinese University of Hong Kong (CUHK) - Lau Chor Tak Institute of Global Economics and Finance ( email )

13/F, Cheng Yu Tung Building
12 Chak Cheung Street
Hong Kong, Shatin, N.T.
Hong Kong

Liping Lu (Contact Author)

VU University Amsterdam

De Boelelaan 1105
Amsterdam, ND North Holland 1081 HV
Netherlands

Steven R. G. Ongena

University of Zurich - Department of Banking and Finance ( email )

Schönberggasse 1
Zürich, 8001
Switzerland

Swiss Finance Institute ( email )

Quartier UNIL-Dorigny, Bâtiment Extranef, # 211
40, Bd du Pont-d'Arve
CH-1015 Lausanne, CH-6900
Switzerland

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