Bank market concentration, relationship banking and small business liquidity

Han, L. ORCID: https://orcid.org/0000-0002-2778-3338, Zhang, S. and Greene, F. J. (2017) Bank market concentration, relationship banking and small business liquidity. International Small Business Journal, 35 (4). pp. 365-384. ISSN 1741-2870 doi: 10.1177/0266242615618733

Abstract/Summary

This paper examines two contrasting interpretations of how bank market concentration (Market Power Hypothesis) and banking relationships (Information Hypothesis) affect three sources of small firm liquidity (cash, lines of credit and trade credit). Supportive of a market power interpretation, we find that in a highly concentrated banking market, small firms hold less cash, have less access to lines of credit, and are more likely to be financially constrained, use greater amounts of more expensive trade credit and face higher penalties for trade credit late payment. We also find support for the information hypothesis: relationship banking improves small business liquidity, particularly in a concentrated banking market, thereby mitigating the adverse effects of bank market concentration derived from market power. Our results are robust to different cash, lines of credit and trade credit measures and to alternative empirical approaches.

Item Type	Article
URI	https://reading-clone.eprints-hosting.org/id/eprint/53389
Identification Number/DOI	10.1177/0266242615618733
Refereed	No
Divisions	Henley Business School > Business Informatics, Systems and Accounting
Publisher	Sage
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