How Much Enterprise Complexity Affects Banks and Smes Relations? Findings on the Italian Market

Abstract

This work wants to demonstrate that complexity is a relevant factor in order to distinguish inside the SMEs aggregate different enterprise typologies and that complex companies have different and more sophisticated financial needs in comparison with simple enterprises. The study carried out on a field of 149 Italian SMEs shows that it is possible to distinguish different groups of enterprises on the basis of complexity and that each group adopts different financial behaviour models. In particular, on the one hand complex companies are closer either to a market finance model or a transactional banking relationship model, on the other hand simple SMEs prefer to adopt a relational banking relationship model and avoid to raise funds in the capital market. The research's results have several effects regarding both SMEs finance and their financers, in particular banks. Complex enterprises have to enable actions in order to be recognised as different than common SMEs, i.e. increasing their information transparency, becoming more accountable to financial stakeholders and adopting a suitable corporate governance model. Banks have to introduce and develop new and different customer segmentation criteria rather then dimension in order to establish in which arenas they want to compete and to develop a suitable product and service supply for each of them.

Keywords: Corporate banking, corporate finance, bank-enterprise relationship; enterprise size; enterprise complexity, financial strategy, enterprise financing, SME funding

JEL Classification: G21, G24, G32, M13, M31