SMEs and the access to bank credit: Evidence on the regional propogation of the financial crisis in the UK

Degryse, Hans, Matthews, Kent ORCID: https://orcid.org/0000-0001-6968-3098 and Zhao, Tianshu 2018. SMEs and the access to bank credit: Evidence on the regional propogation of the financial crisis in the UK. Journal of Financial Stability 38 , pp. 53-70. 10.1016/j.jfs.2018.08.006

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Abstract

We study the sensitivity of banks’ credit supply to small and medium size enterprises (SMEs) in the UK with respect to the banks’ financial condition before and during the financial crisis. Employing unique data on the geographical location of all bank branches in the UK, we connect firms’ access to bank credit to the financial condition (i.e., bank health and the use of core deposits) of all bank branches in the vicinity of the firm for the period 2004–2011. Before the crisis, banks’ local financial conditions did not influence credit availability irrespective of the functional distance (i.e., the distance between bank branch and bank headquarters). However, during the crisis, we find that SMEs with banks within their vicinity that have stronger financial conditions faced greater credit availability when the functional distance is close. Our results point to a “flight to headquarters” effect during the financial crisis.

Item Type:	Article
Date Type:	Publication
Status:	Published
Schools:	Business (Including Economics)
Publisher:	Elsevier
ISSN:	1572-3089
Date of Acceptance:	27 August 2018
Last Modified:	24 Oct 2022 07:37
URI:	https://orca.cardiff.ac.uk/id/eprint/115434

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