Centre for Competition Policy
High quality independent research into competition policy and regulation
AUTHOR: Minyan Zhu
ABSTRACT: This paper provides evidence indicating the importance of foreign banks for the industry dynamics in SME lending market. I explore such dynamics by studying interactively the impact of three aspects of the banking market structure on lending to SMEs, including bank size and its distribution, bank market concentration, and foreign bank presence in Eastern European countries. The results show that larger banks are associated with increasing lending to SMEs, but dominance of very large banks (high inequality in bank size) and high concentration are harmful to SMEs. I also find that the negative effect of dominance of large banks and concentration is largely offset, and that the positive impact of banks size is enhanced by increasing foreign bank presence. The results suggest that the industry dynamics with the presence of large foreign bank break down barriers and create more, not less, opportunities for SMEs to be financed.
KEYWORDS: Foreign Banks, SMEs, Market Structure
CITATION: Zhu, M. (2012) 'Large Foreign Banks and Small-Medium Sized Enterprises (SMEs): Friends or Foes?', CCP Working Paper 12-6
Publication Links
New Publications
CCP Book
Behavioural Economics in Competition and Consumer Policy
Subscription Members
The following organisations are subscribed to the CCP Membership Scheme and their support is gratefully acknowledged
[Membership of this scheme or use of members’ logos does not imply agreement by those organisations with any of the views or ideas published by CCP or any of its staff and students]
