This paper investigates the pro-cyclicality of bank loans to SMEs (Small and Medium Enterprises) and to LEs (Large Enterprises) using aggregated and cross-sectional data from major private, foreign, and state-owned banks in Korea over the period from 1999 to 2008. On the basis of previous studies, it is hypothesized that as compared to LEs, banks loans to SMEs may be more vulnerable to external economic shock. Berger and Udell (1994) suggest that bank loans to SMEs are comparatively risky due to their relatively low collateral and heavy dependence on banks for raising funds. Empirical tests are verified by applying the Rolling Vector Error Correction Model (VECM), Panel Generalized Least Squares (GLS) and the Clustering Fixed Effect Model.
Findings include the robust support for the pro-cyclicality of bank loan to SMEs, but not for LEs. The review of short-term dynamics among first differential variables such as loans and GDP, provides evidence to support a related hypotheses : the profit-oriented motivation of commercial banks in enhancing relationships with SMEs, the characteristics of governance structure in three type banks (private, state-owned, and foreign owned banks), and the large-bank barriers assumption. Therefore, as compared to those made to LEs, bank loans to SMEs are more vulnerable to external economic shocks over the long-term. Meanwhile, smaller domestically owned & private banks continue to enhance their SMEs financing business for short-term lucrative gain. This finding suggests that in regards to loans to SMEs, the credit stabilization role of Korean state-owned banks should be strengthened to prepare for a long economic slump.
Keywords: Pro-cyclicality of bank loans, The Rolling VECM, Panel GLS, Clustering Fixed Effect model, The
profit –oriented motivation, Governance structure, The large-bank barriers assumption
JEL classification: G2; G21
학회소식
학회소식
[2011년 제 1차] Are bank loans to SMEs pro-cyclical?
작성자 : 관리자
조회수 : 853
게시일 :
2011-02-23