Explaining loan rate differentials between small and large companies: evidence from Switzerland
The lending-rate differentials between loans to small and large companies are striking. According to several studies, these disparities of loan rates are primarily a result of a lower informational efficiency at small companies. This study examines to what extent such differences in loan rates are c...
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| Veröffentlicht in: | Small business economics 2012-05, Vol.38 (4), p.481-494 |
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| creator | Dietrich, Andreas |
| description | The lending-rate differentials between loans to small and large companies are striking. According to several studies, these disparities of loan rates are primarily a result of a lower informational efficiency at small companies. This study examines to what extent such differences in loan rates are caused not only by informational inefficiencies, but also by operational costs and the borrower's negotiation power. By using unique, hand-collected data from the credit-pricing models of 15 Swiss regional banks, we provide new empirical evidence that operational costs are a key factor in explaining differences in lending rates between small and large enterprises. Furthermore, we also found that the lack of negotiation power of small enterprises—expressed in the profit margin amount of the bank—has significant explanatory power. |
| doi_str_mv | 10.1007/s11187-010-9273-8 |
| format | Article |
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According to several studies, these disparities of loan rates are primarily a result of a lower informational efficiency at small companies. This study examines to what extent such differences in loan rates are caused not only by informational inefficiencies, but also by operational costs and the borrower's negotiation power. By using unique, hand-collected data from the credit-pricing models of 15 Swiss regional banks, we provide new empirical evidence that operational costs are a key factor in explaining differences in lending rates between small and large enterprises. Furthermore, we also found that the lack of negotiation power of small enterprises—expressed in the profit margin amount of the bank—has significant explanatory power.</abstract><cop>Boston</cop><pub>Springer</pub><doi>10.1007/s11187-010-9273-8</doi><tpages>14</tpages><oa>free_for_read</oa></addata></record> |
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| source | SpringerNature Journals; EBSCOhost Business Source Complete; JSTOR Archive Collection A-Z Listing |
| subjects | Bank loans Bargaining power Business and Management Business structures Collateral Commercial credit Comparative analysis Corporate debt Cost analysis Costs Credit Deficit financing Economic models Economic theory Entrepreneurship Hypotheses Industrial Organization Information Interest rates Loan rates Loans Management Microeconomics Operating costs Profit margins Regional banks Savings banks Size of enterprise Small & medium sized enterprises-SME Small and medium sized enterprises Small business Small business loans Studies Swiss banks Switzerland |
| title | Explaining loan rate differentials between small and large companies: evidence from Switzerland |
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