Credit Rationing and Mature French SMEs: A Disequilibrium Model
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May 25, 2020
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Abstract
A conventional assumption that deserves testing is that small and medium-sized enterprises (SMEs) are most affected by credit crunch. In this respect, a disequilibrium model is designed to analyse the determinants of credit rationing upon a balanced panel of 2,370 mature French SMEs over the period 2002-2010. According to the estimates of simultaneous equations, the desired demand for bank credit is determined by exogenous factors from the supply-side. The credit supply-side validates best trade-off theory, whereas the credit demand-side validates best pecking order theory. The average share of rationed SMEs is seven per cent of the sample, suggesting that access to bank loans is not a major issue for mature French SMEs.
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Adair, P. and Adaskou, M. (2020) “Credit Rationing and Mature French SMEs: A Disequilibrium Model”, World Journal of Applied Economics, 6(1), pp. 55-72. doi: 10.22440/wjae.6.1.4.
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References
Adair, P., & Adaskou, M. (2011). Théories Financières et Endettement des PME en France: Une Analyse en Panel [Financial Theories and the Leverage of SMEs in France: A Panel Data Analysis]. Revue internationale P.M.E, 24, 137-71. doi:10.7202/1013665ar
Adair, P., & Adaskou, M. (2015). Trade-off-theory vs. Pecking-order-theory and the Determinants of Corporate Leverage: Evidence from a Panel Data Analysis Upon French SMEs (2002--2010). Cogent Economics & Finance, 3, 1-12. doi:10.1080/23322039.2015.1006477
Adair, P., & Adaskou, M. (2018). The Capital Structure of Mature French SMEs and Impact of the Great Recession: A Dynamic Panel Data Analysis (2002-2010). Economics, Management and Sustainability, 3, 60-75. doi:10.14254/jems.2018.3-2.5
Adair, P., & Fhima, F. (2013). Le Financement des PME en Tunisie: Dépendance à l’égard des Banques et Rationnement du Crédit [Financing SMEs in Tunisia: Dependence towards Banks and Credit Rationing]. Revue internationale P.M.E., 36, 26-52. doi:10.7202/1024521ar
Alexandre, H., & Buisson-Stéphan, H. (2014). L'impact de la Crise de 2008 Sur le Rationnement du Crédit des PME Françaises [The Impact of the 2008 Crisis upon Credit Rationing of French SMEs]. Revue internationale P.M.E., 27, 95-113. doi:10.7202/1026069ar
Altman, E. (1968). Financial Ratios, Discriminant Analysis and the Prediction of Corporate Bankruptcy. Journal of Finance, 23, 589-609. doi:10.2307/2978933
Atanasova, C. V., & Wilson, N. (2004). Disequilibrium in the UK Corporate Loan Market. Journal of Banking and Finance, 28, 595-614. doi:10.1016/S0378-4266(03)00037-2
Beck, T., & Demirgüç-Kunt, A. (2006). Small and Medium-size Enterprises: Access to Finance as a Growth Constraint. Journal of Banking and Finance, 30, 2931-43. doi:10.1016/j.jbankfin.2006.05.009
Bédué, A. (1997). Choix Financiers des Entreprises et Comportement Bancaire,” [The Financial Choices of Companies and Bank Behavior]. unpublished Ph.D. Dissertation, Université Paris 10, Nanterre, France.
Berger, A. N., & Udell, G. F. (1990). Collateral, Loan Quality, and Bank Risk. Journal of Monetary Economics, 25, 21-42. doi:10.1016/0304-3932(90)90042-3
Berger, A. N., & Udell, G. F. (1998). The Economics of Small Business Finance: The Roles of Private Equity and Debt Markets in the Financial Growth Cycle. Journal of Banking and Finance, 22, 613-73. doi:10.1016/S0378-4266(98)00038-7
Berger, A. N., & Udell, G. F. (2006). A More Complete Conceptual Framework for SME Finance. Journal of Banking and Finance, 30, 2945-66. doi:10.1016/j.jbankfin.2006.05.008
Besanko, D., & Thakor, A. V. (1987). Collateral and Rationing: Sorting Equilibria in Monopolistic and Competitive Market. International Economic Review, 28, 671-89. doi:10.2307/2526573
Bester, H. (1985). Screening vs. Rationing in Credit Markets with Imperfect Information. American Economic Review, 75, 850-55.
Bester, H. (1987). The Role of Collateral in Credit Markets with Imperfect Information. European Economic Review, 31, 887-99. doi:10.1016/0014-2921(87)90005-5
Bourdieu, J., & Colin-Sédillot, B. (1993). Structure de Capital et Coûts d'Information: Le Cas des Entreprises Françaises à la Fin des Années Quatre-vingt [Capital Structure and Information Costs: The Case of French Companies in the Late Eighties]. Economie et Statistique, 268-269, 87-100. doi:10.3406/estat.1993.5812
Chittenden, F., Hall, G., & Hutchinson, P. (1996). Small Firm Growth, Access to Capital Markets and Financial Structure: Review of Issues and an Empirical Investigation. Small Business Economics, 8, 59-67. doi:10.1007/BF00391976
Cieply, S. (1997). Spécificité Financière des PME et Nouvelles Théories du Financement: Une Application à un Échantillon d'Entreprises Françaises [The Financial Specificity of SMEs and New Financing Theories: An Application to a Sample of French Companies]. unpublished Ph.D. Dissertation, Université Lyon 2, Lyon, France.
Cieply, S., & Paranque, B. (1998). Le Rationnement des PME Sur le Marché de Crédit: Mythe ou Réalité? [The Rationing of SMEs on the Credit Market: Myth or Fact?]. Revue Banque et Marchés, 3, 5-17.
Deshon, M., & Freixas, M. (1987). Le Rôle de la Garantie Dans le Contrat de Prêt Bancaire [The Role of Collateral in the Bank Loan Contract]. Finance, 8, 7-32.
Diamond, D. W. (1989). Reputation Acquisition in Debt Markets. Journal of Political Economy, 97, 828-62. doi:10.1086/261630
Dietsch, M. (1998). Atouts et Handicaps du Crédit Client Face au Crédit Bancaire [Strengths and Handicaps of Trade Credit vs. Bank Credit]. Revue d'Économie Financière, 46, 175-93. doi:10.3406/ecofi.1998.2655
Fazzari, S. M., Hubbard, R. G., & Petersen, B. R. (1988). Financing Constraints and Corporate Investment. Brookings Papers on Economic Activity, 1988, 141-206. doi:10.2307/2534426
Gersovitz, M. (1980). On Classification Probabilities for the Disequilibrium Model. Journal of Econometrics, 14, 239-46. doi:10.1016/0304-4076(80)90093-7
Harhoff, D., & Körting, T. (1998). Lending Relationships in Germany – Empirical Evidence from Survey Data. Journal of Banking and Finance, 22, 1317-53. doi:10.1016/S0378-4266(98)00061-2
Haubrich, J. (1989). Financial Intermediation, Delegated Monitoring and Long Term Relationships. Journal of Banking and Finance, 13, 9-20. doi:10.1016/0378-4266(89)90015-0
Hausman, J. A., & Taylor, E. (1981). Panel Data and Unobservable Individual Effects. Econometrica, 49, 1377-98. doi:10.2307/1911406
Hoshi, T., Kashyap, A., & Scharfstein, D. (1991). Corporate Structure, Liquidity, and Investment: Evidence from Japanese Industrial Groups. The Quarterly Journal of Economics, 106, 33-60. doi:10.2307/2937905
Jensen, M. C., & Meckling, W. H. (1976). Theory of the Firm: Managerial Behavior, Agency Costs and Ownership Structure. Journal of Financial Economics, 3, 305-60. doi:10.1016/0304-405X(76)90026-X
KPMG. (2012). Panorama de l'Évolution des PME Depuis 10 Ans [A Panorama of the Evolution of SMEs in the Past 10 Years].
Kremp, E., & Sevestre, P. (2013). Did the Crisis Induce Credit Rationing for French SMEs? Journal of Banking and Finance, 37, 3757-72. doi:10.1016/j.jbankfin.2013.05.028
Levratto, N. (1992). Une Analyse du Marché du Crédit en Termes de Rationnement [An Analysis of the Credit Market in Terms of Rationing]. unpublished Ph.D. Dissertation, Université de Nice Sophia-Antipolis, Nice, France.
López-Gracia, J., & Sogorb-Mira, F. (2008). Testing Trade-off and Pecking-order Theories Financing SMEs. Small Business Economics, 31, 117-36. doi:10.1007/s11187-007-9088-4
Maddala, G. S. (1983). Limited-Dependent and Qualitative Variables in Econometrics. Cambridge University Press.
Maddala, G. S., & Nelson, F. D. (1974). Maximum Likelihood Methods for Models of Markets in Disequilibrium. Econometrica, 42, 1003-30. doi:10.2307/1914215
Modigliani, F., & Miller, M. H. (1963). Corporate Income Taxes and the Cost of Capital: A Correction. American Economic Review, 53, 433-43.
Myers, S. C. (1977). Determinants of Corporate Borrowing. Journal of Financial Economics, 5, 147-75. doi:10.1016/0304-405X(77)90015-0
Myers, S. C., & Majluf, N. S. (1984). Corporate Financing and Investment Decisions When Firms Have Information that Investors Do Not Have. Journal of Financial Economics, 13, 187-221. doi:10.1016/0304-405X(84)90023-0
Perez, S. J. (1998). Testing for Credit Rationing: An Application of Disequilibrium Econometrics. Journal of Macroeconomics, 20, 721-39. doi:10.1016/S0164-0704(98)00081-0
Petersen, M. A., & Rajan, R. G. (1994). The Benefits of Lending Relationships: Evidence from Business Data. Journal of Finance, 49, 3-35. doi:10.1111/j.1540-6261.1994.tb04418.x
Psillaki, M. (1995). Rationnement du Crédit et PME: Une Tentative de Mise en Relation [An Attempt to Match Credit Rationing with SMEs]. Revue Internationale PME, 8, 67-90. doi:10.7202/1008359ar
Psillaki, M., Tsolas, I. E., & Margaritis, D. (2010). Evaluation of Credit Risk Based on Firm Performance. European Journal of Operational Research, 201, 873-81. doi:10.1016/j.ejor.2009.03.032
Sealey, C. W. (1979). Credit Rationing in the Commercial Loan Market: Estimates of a Structural Model under Conditions of Disequilibrium. Journal of Finance, 34, 689-702. doi:10.1111/j.1540-6261.1979.tb02134.x
Steijvers, T. (2008). Existence of Credit Rationing for SMEs in the Belgian Corporate Loan Market. Working Paper, Social Science Research Network (SSRN). doi:10.2139/ssrn.495162
Stiglitz, J. E. (1969). A Re-Examination of the Modigliani-Miller Theorem. American Economic Review, 59, 784-92.
Stiglitz, J. E., & Weiss, A. (1981). Credit Rationing in Markets with Imperfect Information. American Economic Review, 71, 393-410.
Stiglitz, J. E., & Weiss, A. (1987). Credit Rationing with Many Borrowers. American Economic Review, 77, 228-31.
Su, X., & Zhang, L. (2017). A Reexamination of Credit Rationing in the Stiglitz and Weiss Model. Journal of Money, Credit and Banking, 49, 1059-72. doi:10.1111/jmcb.12406
Titman, S., & Wessels, R. (1988). The Determinants of Capital Structure Choice. Journal of Finance, 43, 1-19. doi:10.1111/j.1540-6261.1988.tb02585.x
Voordeckers, W., & Steijvers, T. (2006). Business Collateral and Personal Commitments in SME Lending. Journal of Banking and Finance, 30, 3067-86. doi:10.1016/j.jbankfin.2006.05.003
Yan, Y. (1997). Credit Rationing, Bankruptcy Cost and Optimal Debt Contract for Small Business. Working Paper, Federal Reserve Bank of Cleveland.
Ziane, Y. (2004). Structure Financière, Relations Bancaires de Long Terme et Financement Interentreprises des PME Françaises.” [Financial Structure, Long-term Banking Relationships and the Intercompany Financing of French SMEs]. unpublished Ph.D. Dissertation, Université Paris 10, Nanterre, France.
Adair, P., & Adaskou, M. (2015). Trade-off-theory vs. Pecking-order-theory and the Determinants of Corporate Leverage: Evidence from a Panel Data Analysis Upon French SMEs (2002--2010). Cogent Economics & Finance, 3, 1-12. doi:10.1080/23322039.2015.1006477
Adair, P., & Adaskou, M. (2018). The Capital Structure of Mature French SMEs and Impact of the Great Recession: A Dynamic Panel Data Analysis (2002-2010). Economics, Management and Sustainability, 3, 60-75. doi:10.14254/jems.2018.3-2.5
Adair, P., & Fhima, F. (2013). Le Financement des PME en Tunisie: Dépendance à l’égard des Banques et Rationnement du Crédit [Financing SMEs in Tunisia: Dependence towards Banks and Credit Rationing]. Revue internationale P.M.E., 36, 26-52. doi:10.7202/1024521ar
Alexandre, H., & Buisson-Stéphan, H. (2014). L'impact de la Crise de 2008 Sur le Rationnement du Crédit des PME Françaises [The Impact of the 2008 Crisis upon Credit Rationing of French SMEs]. Revue internationale P.M.E., 27, 95-113. doi:10.7202/1026069ar
Altman, E. (1968). Financial Ratios, Discriminant Analysis and the Prediction of Corporate Bankruptcy. Journal of Finance, 23, 589-609. doi:10.2307/2978933
Atanasova, C. V., & Wilson, N. (2004). Disequilibrium in the UK Corporate Loan Market. Journal of Banking and Finance, 28, 595-614. doi:10.1016/S0378-4266(03)00037-2
Beck, T., & Demirgüç-Kunt, A. (2006). Small and Medium-size Enterprises: Access to Finance as a Growth Constraint. Journal of Banking and Finance, 30, 2931-43. doi:10.1016/j.jbankfin.2006.05.009
Bédué, A. (1997). Choix Financiers des Entreprises et Comportement Bancaire,” [The Financial Choices of Companies and Bank Behavior]. unpublished Ph.D. Dissertation, Université Paris 10, Nanterre, France.
Berger, A. N., & Udell, G. F. (1990). Collateral, Loan Quality, and Bank Risk. Journal of Monetary Economics, 25, 21-42. doi:10.1016/0304-3932(90)90042-3
Berger, A. N., & Udell, G. F. (1998). The Economics of Small Business Finance: The Roles of Private Equity and Debt Markets in the Financial Growth Cycle. Journal of Banking and Finance, 22, 613-73. doi:10.1016/S0378-4266(98)00038-7
Berger, A. N., & Udell, G. F. (2006). A More Complete Conceptual Framework for SME Finance. Journal of Banking and Finance, 30, 2945-66. doi:10.1016/j.jbankfin.2006.05.008
Besanko, D., & Thakor, A. V. (1987). Collateral and Rationing: Sorting Equilibria in Monopolistic and Competitive Market. International Economic Review, 28, 671-89. doi:10.2307/2526573
Bester, H. (1985). Screening vs. Rationing in Credit Markets with Imperfect Information. American Economic Review, 75, 850-55.
Bester, H. (1987). The Role of Collateral in Credit Markets with Imperfect Information. European Economic Review, 31, 887-99. doi:10.1016/0014-2921(87)90005-5
Bourdieu, J., & Colin-Sédillot, B. (1993). Structure de Capital et Coûts d'Information: Le Cas des Entreprises Françaises à la Fin des Années Quatre-vingt [Capital Structure and Information Costs: The Case of French Companies in the Late Eighties]. Economie et Statistique, 268-269, 87-100. doi:10.3406/estat.1993.5812
Chittenden, F., Hall, G., & Hutchinson, P. (1996). Small Firm Growth, Access to Capital Markets and Financial Structure: Review of Issues and an Empirical Investigation. Small Business Economics, 8, 59-67. doi:10.1007/BF00391976
Cieply, S. (1997). Spécificité Financière des PME et Nouvelles Théories du Financement: Une Application à un Échantillon d'Entreprises Françaises [The Financial Specificity of SMEs and New Financing Theories: An Application to a Sample of French Companies]. unpublished Ph.D. Dissertation, Université Lyon 2, Lyon, France.
Cieply, S., & Paranque, B. (1998). Le Rationnement des PME Sur le Marché de Crédit: Mythe ou Réalité? [The Rationing of SMEs on the Credit Market: Myth or Fact?]. Revue Banque et Marchés, 3, 5-17.
Deshon, M., & Freixas, M. (1987). Le Rôle de la Garantie Dans le Contrat de Prêt Bancaire [The Role of Collateral in the Bank Loan Contract]. Finance, 8, 7-32.
Diamond, D. W. (1989). Reputation Acquisition in Debt Markets. Journal of Political Economy, 97, 828-62. doi:10.1086/261630
Dietsch, M. (1998). Atouts et Handicaps du Crédit Client Face au Crédit Bancaire [Strengths and Handicaps of Trade Credit vs. Bank Credit]. Revue d'Économie Financière, 46, 175-93. doi:10.3406/ecofi.1998.2655
Fazzari, S. M., Hubbard, R. G., & Petersen, B. R. (1988). Financing Constraints and Corporate Investment. Brookings Papers on Economic Activity, 1988, 141-206. doi:10.2307/2534426
Gersovitz, M. (1980). On Classification Probabilities for the Disequilibrium Model. Journal of Econometrics, 14, 239-46. doi:10.1016/0304-4076(80)90093-7
Harhoff, D., & Körting, T. (1998). Lending Relationships in Germany – Empirical Evidence from Survey Data. Journal of Banking and Finance, 22, 1317-53. doi:10.1016/S0378-4266(98)00061-2
Haubrich, J. (1989). Financial Intermediation, Delegated Monitoring and Long Term Relationships. Journal of Banking and Finance, 13, 9-20. doi:10.1016/0378-4266(89)90015-0
Hausman, J. A., & Taylor, E. (1981). Panel Data and Unobservable Individual Effects. Econometrica, 49, 1377-98. doi:10.2307/1911406
Hoshi, T., Kashyap, A., & Scharfstein, D. (1991). Corporate Structure, Liquidity, and Investment: Evidence from Japanese Industrial Groups. The Quarterly Journal of Economics, 106, 33-60. doi:10.2307/2937905
Jensen, M. C., & Meckling, W. H. (1976). Theory of the Firm: Managerial Behavior, Agency Costs and Ownership Structure. Journal of Financial Economics, 3, 305-60. doi:10.1016/0304-405X(76)90026-X
KPMG. (2012). Panorama de l'Évolution des PME Depuis 10 Ans [A Panorama of the Evolution of SMEs in the Past 10 Years].
Kremp, E., & Sevestre, P. (2013). Did the Crisis Induce Credit Rationing for French SMEs? Journal of Banking and Finance, 37, 3757-72. doi:10.1016/j.jbankfin.2013.05.028
Levratto, N. (1992). Une Analyse du Marché du Crédit en Termes de Rationnement [An Analysis of the Credit Market in Terms of Rationing]. unpublished Ph.D. Dissertation, Université de Nice Sophia-Antipolis, Nice, France.
López-Gracia, J., & Sogorb-Mira, F. (2008). Testing Trade-off and Pecking-order Theories Financing SMEs. Small Business Economics, 31, 117-36. doi:10.1007/s11187-007-9088-4
Maddala, G. S. (1983). Limited-Dependent and Qualitative Variables in Econometrics. Cambridge University Press.
Maddala, G. S., & Nelson, F. D. (1974). Maximum Likelihood Methods for Models of Markets in Disequilibrium. Econometrica, 42, 1003-30. doi:10.2307/1914215
Modigliani, F., & Miller, M. H. (1963). Corporate Income Taxes and the Cost of Capital: A Correction. American Economic Review, 53, 433-43.
Myers, S. C. (1977). Determinants of Corporate Borrowing. Journal of Financial Economics, 5, 147-75. doi:10.1016/0304-405X(77)90015-0
Myers, S. C., & Majluf, N. S. (1984). Corporate Financing and Investment Decisions When Firms Have Information that Investors Do Not Have. Journal of Financial Economics, 13, 187-221. doi:10.1016/0304-405X(84)90023-0
Perez, S. J. (1998). Testing for Credit Rationing: An Application of Disequilibrium Econometrics. Journal of Macroeconomics, 20, 721-39. doi:10.1016/S0164-0704(98)00081-0
Petersen, M. A., & Rajan, R. G. (1994). The Benefits of Lending Relationships: Evidence from Business Data. Journal of Finance, 49, 3-35. doi:10.1111/j.1540-6261.1994.tb04418.x
Psillaki, M. (1995). Rationnement du Crédit et PME: Une Tentative de Mise en Relation [An Attempt to Match Credit Rationing with SMEs]. Revue Internationale PME, 8, 67-90. doi:10.7202/1008359ar
Psillaki, M., Tsolas, I. E., & Margaritis, D. (2010). Evaluation of Credit Risk Based on Firm Performance. European Journal of Operational Research, 201, 873-81. doi:10.1016/j.ejor.2009.03.032
Sealey, C. W. (1979). Credit Rationing in the Commercial Loan Market: Estimates of a Structural Model under Conditions of Disequilibrium. Journal of Finance, 34, 689-702. doi:10.1111/j.1540-6261.1979.tb02134.x
Steijvers, T. (2008). Existence of Credit Rationing for SMEs in the Belgian Corporate Loan Market. Working Paper, Social Science Research Network (SSRN). doi:10.2139/ssrn.495162
Stiglitz, J. E. (1969). A Re-Examination of the Modigliani-Miller Theorem. American Economic Review, 59, 784-92.
Stiglitz, J. E., & Weiss, A. (1981). Credit Rationing in Markets with Imperfect Information. American Economic Review, 71, 393-410.
Stiglitz, J. E., & Weiss, A. (1987). Credit Rationing with Many Borrowers. American Economic Review, 77, 228-31.
Su, X., & Zhang, L. (2017). A Reexamination of Credit Rationing in the Stiglitz and Weiss Model. Journal of Money, Credit and Banking, 49, 1059-72. doi:10.1111/jmcb.12406
Titman, S., & Wessels, R. (1988). The Determinants of Capital Structure Choice. Journal of Finance, 43, 1-19. doi:10.1111/j.1540-6261.1988.tb02585.x
Voordeckers, W., & Steijvers, T. (2006). Business Collateral and Personal Commitments in SME Lending. Journal of Banking and Finance, 30, 3067-86. doi:10.1016/j.jbankfin.2006.05.003
Yan, Y. (1997). Credit Rationing, Bankruptcy Cost and Optimal Debt Contract for Small Business. Working Paper, Federal Reserve Bank of Cleveland.
Ziane, Y. (2004). Structure Financière, Relations Bancaires de Long Terme et Financement Interentreprises des PME Françaises.” [Financial Structure, Long-term Banking Relationships and the Intercompany Financing of French SMEs]. unpublished Ph.D. Dissertation, Université Paris 10, Nanterre, France.