Credit granting to small firms: A Brazilian case

Felipe Zambaldi; Francisco Aranha; Hedibert Lopes; Ricardo Politi

doi:10.1016/j.jbusres.2009.11.018

Credit granting to small firms: A Brazilian case

Felipe Zambaldi, Francisco Aranha, Hedibert Lopes, Ricardo Politi

Research output: Contribution to journal › Article › peer-review

40 Scopus citations

Abstract

Transaction costs limit the supply of credit to small and medium-sized firms (SMEs). From a sample of 65,535 SME credit proposals submitted to a large Brazilian bank between January 2004 and September 2006, this research analyzes credit granting decisions. Results suggest that small firms face credit rationing and that low risk credit contracts with liquid collateral are their primary source of credit. Also, the bank captures private information through its lending relationships with borrowers, which affects its credit granting decisions. The findings reveal that the bank under study faces difficulties in expanding the supply of credit to small firms mainly because of cost, collateral-dependency and constraints due to asymmetric information.

Original language	English (US)
Pages (from-to)	309-315
Number of pages	7
Journal	Journal of Business Research
Volume	64
Issue number	3
DOIs	https://doi.org/10.1016/j.jbusres.2009.11.018
State	Published - Mar 2011
Externally published	Yes

Keywords

Asymmetric information
Credit rationing
Small and medium-sized enterprises (SMEs)
Small business financing
Transaction costs

ASJC Scopus subject areas

Marketing

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10.1016/j.jbusres.2009.11.018

Cite this

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title = "Credit granting to small firms: A Brazilian case",

abstract = "Transaction costs limit the supply of credit to small and medium-sized firms (SMEs). From a sample of 65,535 SME credit proposals submitted to a large Brazilian bank between January 2004 and September 2006, this research analyzes credit granting decisions. Results suggest that small firms face credit rationing and that low risk credit contracts with liquid collateral are their primary source of credit. Also, the bank captures private information through its lending relationships with borrowers, which affects its credit granting decisions. The findings reveal that the bank under study faces difficulties in expanding the supply of credit to small firms mainly because of cost, collateral-dependency and constraints due to asymmetric information.",

keywords = "Asymmetric information, Credit rationing, Small and medium-sized enterprises (SMEs), Small business financing, Transaction costs",

author = "Felipe Zambaldi and Francisco Aranha and Hedibert Lopes and Ricardo Politi",

note = "Funding Information: The authors thank CNPq, CAPES, CEB-Serasa and FGV-EAESP for providing the financial support to this research. The authors also thank two anonymous reviewers for their comments.",

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language = "English (US)",

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T1 - Credit granting to small firms

T2 - A Brazilian case

AU - Zambaldi, Felipe

AU - Aranha, Francisco

AU - Lopes, Hedibert

AU - Politi, Ricardo

N1 - Funding Information: The authors thank CNPq, CAPES, CEB-Serasa and FGV-EAESP for providing the financial support to this research. The authors also thank two anonymous reviewers for their comments.

PY - 2011/3

Y1 - 2011/3

N2 - Transaction costs limit the supply of credit to small and medium-sized firms (SMEs). From a sample of 65,535 SME credit proposals submitted to a large Brazilian bank between January 2004 and September 2006, this research analyzes credit granting decisions. Results suggest that small firms face credit rationing and that low risk credit contracts with liquid collateral are their primary source of credit. Also, the bank captures private information through its lending relationships with borrowers, which affects its credit granting decisions. The findings reveal that the bank under study faces difficulties in expanding the supply of credit to small firms mainly because of cost, collateral-dependency and constraints due to asymmetric information.

AB - Transaction costs limit the supply of credit to small and medium-sized firms (SMEs). From a sample of 65,535 SME credit proposals submitted to a large Brazilian bank between January 2004 and September 2006, this research analyzes credit granting decisions. Results suggest that small firms face credit rationing and that low risk credit contracts with liquid collateral are their primary source of credit. Also, the bank captures private information through its lending relationships with borrowers, which affects its credit granting decisions. The findings reveal that the bank under study faces difficulties in expanding the supply of credit to small firms mainly because of cost, collateral-dependency and constraints due to asymmetric information.

KW - Asymmetric information

KW - Credit rationing

KW - Small and medium-sized enterprises (SMEs)

KW - Small business financing

KW - Transaction costs

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Credit granting to small firms: A Brazilian case

Abstract

Keywords

ASJC Scopus subject areas

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