Publikationen des DIW Berlin

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Reduced Cross-Border Lending and Financing Costs of SMEs Franziska Bremus, Katja Neugebauer In: Journal of International Money and Finance (2017), im Ersch. [online first: 2017-09-25]

Abstract:

This paper investigates how the withdrawal of banks from their cross-border business impacted the borrowing costs of European firms since the crisis. We combine aggregate information on total and cross-border credit with firm-level survey data for the period 2010 - 2014. We find that the decline in cross-border lending led to a deterioration in the borrowingconditions of small firms. In countries with more pronounced reductions in cross-border credit inflows, the likelihood of a rise in firms’ external financing costs increased. This result is mainly driven by the interbank channel, which plays a crucial role in transmitting shocks to the real sector across borders.

JEL-Classification:

F34;F36;G15;G21

Keywords:

International banking, Firm finance, Credit constraints