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The Ability of Banks to Lend to Informationally Opaque Small Businesses

Posted: 9 Sep 2001  

Allen N. Berger

University of South Carolina - Darla Moore School of Business; Wharton Financial Institutions Center; European Banking Center

Leora F. Klapper

World Bank; World Bank - Development Research Group (DECRG)

Gregory F. Udell

Indiana University - Kelley School of Business - Department of Finance

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Abstract

We test hypotheses about the effects of bank size, foreign ownership, and distress on lending to informationally opaque small firms using a rich new data set on Argentinean banks, firms, and loans. We also test hypotheses about borrowing from a single bank versus multiple banks. Our results suggest that large and foreign-owned institutions may have difficulty extending relationship loans to opaque small firms. Bank distress appears to have no greater effect on small borrowers than on large borrowers, although even small firms may react to bank distress by borrowing from multiple banks, raising borrowing costs and destroying some relationship benefits.

Keywords: Banks, mergers, foreign ownership, financial distress, multiple lenders

JEL Classification: G21, G15, G28, G34, E58

Suggested Citation

Berger, Allen N. and Klapper, Leora F. and Udell, Gregory F., The Ability of Banks to Lend to Informationally Opaque Small Businesses. Journal of Banking and Finance, Vol. 25, 2001. Available at SSRN: https://ssrn.com/abstract=282511

Allen N. Berger (Contact Author)

University of South Carolina - Darla Moore School of Business ( email )

1705 College St
Francis M. Hipp Building
Columbia, SC 29208
United States
803-576-8440 (Phone)
803-777-6876 (Fax)

Wharton Financial Institutions Center

Philadelphia, PA 19104-6367
United States

European Banking Center

P.O. Box 90153
Tilburg, 5000 LE
Netherlands

Leora F. Klapper

World Bank ( email )

1818 H Street, N.W.
Washington, DC 20433
United States
202-473-8738 (Phone)

HOME PAGE: http://econ.worldbank.org/staff/lklapper

World Bank - Development Research Group (DECRG)

1818 H. Street, N.W.
MSN3-311
Washington, DC 20433
United States

Gregory F. Udell

Indiana University - Kelley School of Business - Department of Finance ( email )

1309 E. 10th St.
Bloomington, IN 47405
United States

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